A HELOC on a Home Held in a Living Trust

Why the trust is not the obstacle it sounds like

A revocable living trust does not change who controls the house. While you are alive and able, you are usually the settlor (the person who created the trust), the trustee (the person who manages it) and the beneficiary (the person it benefits) all at once. The deed says the trustee owns the home; in practice you still live there, pay the taxes, insure it and decide what happens to it. Mortgage rules recognize that. The federal guidelines most residential lenders build from treat a loan to an inter vivos revocable trust as an ordinary loan to the people who created it, provided the trust meets a short list of conditions.

The conditions lenders look for

• The trust is revocable and was created by one or more individuals — not a company.
• A settlor is among the trustees (or a bank or trust company serves as trustee), and the trust document gives the trustee the power to borrow and to mortgage the property.
• A settlor lives in the home if it is a primary residence, and signs the loan as borrower.
• The title insurer will insure the lien without carving out an exception for the trust or the trustee.

Most family living trusts drafted by an estate-planning attorney in the last few decades meet all four. When one does not, it is almost always the power-to-encumber language or an unusual trustee arrangement, and your attorney can usually address it with an amendment rather than a new trust.

Who signs what

Expect two capacities on the closing documents. You sign the line-of-credit agreement as the borrower — the person whose credit and income qualify the line. You, as trustee, sign the security instrument that pledges the house, often with language showing you sign "as trustee of the [name] Trust dated [date]." If the trust has co-trustees, the trust document decides whether one may act alone or all must sign. Married couples with a joint trust usually both sign in both capacities.

What you will be asked for

In most cases, not the whole trust. A certification of trust — a short sworn summary signed by the trustee — plus the pages that name the current trustee and grant the power to borrow. Many states, Florida and California among them, have statutes that let a lender rely on the certification instead of reading the dispositive provisions that say who inherits what. Some programs still want the full document for their attorney to review; we tell you which before you send anything.

What the line itself looks like

The same products available to a homeowner who holds title in their own name, on the programs that accept trusts. Some are fixed-rate lines whose payment covers principal and interest from the first month; others are bank-style lines with a draw period and a variable rate. Some programs value most lines up to $400,000 with an automated valuation instead of an appraisal appointment; others send an appraiser. How much you can borrow, the pricing and the credit standards are set by the program and quoted for your home after a soft credit pull — they are not published here.

What not to do

Do not sign a deed taking the house out of the trust because a loan officer said it would make things easier. It does make the loan easier for that lender. It also creates a gap in the plan you paid an attorney to build, and it is the step people most often forget to reverse. The deed-out page explains the risks and the cases where an attorney might still choose it.

The process

1. Tell us how the home is titled. The exact name on the deed, who the trustees are, whether the trust is revocable, and roughly what you want to borrow. Soft credit pull only.
2. Program match. We confirm which programs accept your trust in your state and on your property type, and what each allows.
3. Trust review. The certification of trust (or the full document, if that program requires it) goes to the lender and title insurer before you spend time on anything else.
4. Close. Valuation, e-sign or notary signing in the right capacities, recording, and funding — the trust untouched.

Questions trust owners ask about this