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:
- State: Arizona
Answer:
A deed conveys ownership of the property, usually the entire ownership interest of the grantor(s). The effect is simple - the grantee(s) become the owner of the property (holds title to the property).
The effect on an outstanding mortgage can be significant. Most purchase money mortgages for residential property contain standard language requiring the borrowers of the money to be the owners of the property secured under the mortgage. In fact, most mortgages contain language that states if any ownership interest in the property is transferred while the loan is still outstanding, the lender reserves the right to demand full payment of the loan. This is often called an "acceleration clause." The lender may allow the transfer but the borrowers must first gain the lender's consent.
An acceleration clause is a contractual provision which allows the holder to declare the remaining balance due and payable immediately upon the occurrence of a default in the obligation.
If the grantee of the transfer is essentially the same as the grantor (i.e. borrower in the bank's eyes), the bank may give consent. A LLC soley owned by the original borrowers may be permitted, especially if personal guarantees are given.
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.
