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What happens when a property deed is transferred to an LLC?

What happens when a property deed is transferred to an LLC?

Q: What is the disadvantage of putting a property in an LLC?

One disadvantage of putting a property in an LLC is that it may complicate financing. Lenders often view LLCs as higher risk, which can lead to higher interest rates or stricter loan terms. Additionally, transferring property to an LLC may trigger tax implications or affect existing mortgages.

Q: Is adding a spouse to a deed considered a gift?

Adding a spouse to a deed can be considered a gift, particularly if the property is transferred without compensation. This may have tax implications, as gifts above a certain value may be subject to gift tax. It's advisable to consult a tax professional to understand the potential consequences.

Full question:

I want to transfer the deed of a property - Husband and Wife to an LLC. What is the impact of that transfer? And how does it affect the mortgage? Can the mortgage still be in my name if the deed is on the LLC's name?

Category: Real Property
Subcategory: Deeds
Date: 04/07/2025
State: Arizona

Answer:

A deed transfers ownership of a property from the grantor(s) to the grantee(s). This means the LLC will own the property once the deed is transferred.

The impact on the mortgage can be significant. Most residential mortgages include a clause that requires the borrowers to be the owners of the property. If ownership is transferred while the mortgage is still active, the lender may have the right to demand full repayment of the loan, known as an acceleration clause. The lender might allow the transfer, but you would need their consent first.

If the LLC is solely owned by the original borrowers, the lender may grant this consent, especially if personal guarantees are provided.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

How do you transfer property ownership to an LLC?

To transfer property ownership to an LLC, you need to execute a new deed that names the LLC as the grantee. This deed must be signed by the current owners and then recorded with the county recorder's office. It's also advisable to check with your mortgage lender, as they may have specific requirements or need to approve the transfer.

Can a mortgage be transferred to an LLC?

Generally, a mortgage cannot be directly transferred to an LLC. Most mortgage agreements have a due-on-sale clause, meaning the lender can demand full repayment if the property is transferred. However, if the LLC is owned by the original borrowers, the lender may allow the transfer with their consent, especially if personal guarantees are provided.