I’ve had a lot of people tell me that you can transfer a property to an LLC after purchasing in your personal name. It seems to me that if you transfer title and change the insurance to the LLC right after closing, the lender will be notified from the insurance company and the DOSC will be triggered. While this may not be illegal it sounds very shady to me. The insurance aget I spoke said there is no other way to handle the transfer from an insurance stand point without notifying the lender. Any thoughts?
It is not “illegal” to violate a DOSC imposed by a lender, just against their ‘rules’…normally, as long as the loan is performing, there’s no issue…did you call the lender and ask them?
Keith
Yes, they said you cannot do that. So, I guess my whole point is that just not telling them about the transfer will not work, since they will be notified by the insurance company that the name on the policy has changed, correct?
They will probably be notified but it takes a significant amount of work to call the loan…if you’re paying, they most likely will not call it.
Keith
Read your due on sale clause, they often state that it is against the rules without the lender’s expressed written permission. If so it might be worth another call to your lender to speak with someone authorized to actually say yes rather than someone reading from a script. Explain to them that you are seeking their expressed written permission and ask what you need to do to complete the paperwork.
This entire issue is easily taken care of by purchasing the property in the LLC name instead of your personal name. Why buy and then transfer? Just put it in the LLC name right from the start.
Mike
Because the rate is much higher…
What rate is much higher? I have dozens of rentals in LLC’s and am not sure what you are talking about.
Mike
The loan directly to an LLC was higher than getting a personal loan, at least from major banks. There is no credit history for the LLC and even with a personal guarantee the rates were higher. Do you mind if I ask what bank you use to get a competitive rate through your LLC?
I use two small local banks. I won’t publish their names, but these banks are not unique.
Mike