By the way, FHA and VA loans do not have these provisions but they do have a requirement that anyone assuming the loan must go through a credit check and be approved prior to allowing the assumption
This provision creates a problem for transferring title in the home when there is an existing mortgage lien on the home. It is becoming more common nowadays for seniors to borrow against the equity in their homes because many seniors don’t have the income otherwise to pay their bills. The most common types of loans are home equity lines of credit or reverse mortgages. But, we are also seeing more and more seniors refinancing their homes outright to get at the equity.
Transferring the home into a trust or even retitling it requires permission from the mortgage company or bank. Living trusts are specifically excluded from this provision and can be used as a way of shifting the title. Unfortunately, living trusts are of little value in the type of planning that we do for Medicaid Related Site or VA benefits.
If there is a mortgage lien on the property, this may prevent implementing some of the strategies that we have discussed. On the other hand, as long as the original titleholders names remain on the property, there should be no reason to prevent putting other names on there as well. However, the clause does require permission, even for a partial transfer of interest in the property.
In some cases, triggering the due on sale clause might be an acceptable practice for certain strategies. It is not illegal to trigger the clause, it only gives the mortgage holder the right to demand full payment or eventually foreclose. If the primary residence is going to be left vacant, and the intent is to sell, then triggering the clause might be the lesser of two evils in the planning process. If the sale were agreed to prior to transferring the property to a trust, the seller has 30 days before the bank can take any action. On the other hand, if the housing market is not good and it takes too long to make the sale, foreclosure could happen and that might be a worse consequence. In addition, transfer of the title to a trust might also affect the title insurance filed with the mortgage company.
Then there is the case of reverse mortgages. If there is a reverse mortgage on the property, when the property is vacated by the original individuals on the mortgage, the loan becomes due anyway. Oftentimes, the bank is willing to wait for 12 months in order to get the property sold.
Seniors and caregivers search online everyday for eldercare services and frequently find the National Care Planning Council. Each month, we provide resources to over 40,000 visitors. Our site offers a place for professionals to advertise their services to the public.
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The tools and training in our Successful Senior Marketing System are designed to provide you with several ways to promote your services, make group presentations in your community, and organize a local care planning council of professionals.
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