Transfer Property Deed With Mortgage in My Name

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Can I transfer my propery deeds to my son even though the mortgage is in my name?


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For purposes of this answer I am going to presume that the real estate in question are one-to-four family residential real properties. Of course individuals are free to sell or transfer their interest in real property to whomever they want. The question is ‘what are the consequences of the sale or transfer?’

Most loan agreements contain a “due-on-sale” clause. This permits the lender to demand payment in full if an interest in the property is sold or transferred by the original borrower without the lender’s permission. But there are provisions in Federal law that prohibit lenders from enforcing due-on-sale loan provisions in certain instances. One of those instances is “ a transfer where the spouse or children of the borrower become an owner of the property.”

See: http://www.law.cornell.edu/uscode/uscode12/uscsec12_00001701—-j003-.html

So check with your legal adviser on whether this exemption to the enforcement of a due-on-sale clause would apply to your situation.

Another consideration are the tax consequences of the transfer. There could be issues with gift and estate tax, capital gains, and with the computation of your son’s basis in the properties if he ever sells the property. These issues are quite complex and you should check with your tax professional to make sure that your financial goals are accomplished with this transfer and no unintended tax consequences arise.

One other issue worthy of note is that your credit could be damaged if your son doesn’t make the mortgage payments on time. Just because you transfer interest in a property doesn’t relieve you of liability on mortgages in your name.

Answered over 5 years ago
Harlan Cooper
679 3

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