Full question:
My husband and I would like to give my mother and father a piece of land (29.25 acres). We owe around $63,000 on it. We want to give them a General Warranty Deed (for Christmas) that shows the property being in their name..conveyed to them by us (we have the General Warranty Deed in our name now). We still want to make the payments on it to the bank until paid off. Are we legally allowed to do this? If so, what are the steps I need to take to make this happen?
- Category: Real Property
- Subcategory: Sales
- Date:
- State: Tennessee
Answer:
If there is a mortgage on the property, the transfer may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce. Most lenders require that the mortgage or deed of trust contain a due on sale clause. This is an acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property. Such a clause permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance due and payable immediately if the property securing the loan is sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent.
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. I suggest reading the contract terms with the lender carefully or contacting the lender to inquire further.
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.
