I’ve heard that if a home seller places a property into a land trust and assigns me as the beneficiary, that this does not violate the mortgage due on sale clause. Has anyone tried this?
The due on sale clause is a providion that is totally at the discretion of the lender. If the lender calls that mortgage payable per terms of the deed, then that is their right and it preceedes ANY agreement short of what is allowed by law. Yes, there are different kinds of trusts and technically, you bought the Trust you placed the property in, but ask how a judge would view the transaction a year or two down the road…maybe when the original owner files bankruptcy. You really NEED to be ready to respond should that happen. I believe a Trust/Sub2 needs to be done ‘outloud’ and in the open. Go into it with the understanding you will need to remortgage that proeprty if necessay. I know several investors who do a straight, simple wrap to control/hold the property and things go just fine, but they are prepared to get a mortgage if necessary.
I also know a couple of investors that have a complex Equity Shared Trust with several benficiaries and they hold control property with the assurance their attornies can handle the words in the trust. Wow, this is an involved subject, so many if this/then that to think of and be prepared for.
Any change in ownership to a mortaged property is generally considered to involk the due on sale clause if the lender decides to do so.
There are alot of mortages out there that contain an assumption clause and can be requested at least once over the life of the loan by law. Any additional requests would be completely up to the lenders discresion.
If someone qualifies to assume the loan then usually the lender must allow it to take place.
Thanks for the good info!
Another question: In the interests of privacy, is it possible to sell a land trust, or must the property be sold directly to another buyer?