How Can I Transfer My Mortgages to My LLC?

By River Braun, J.D.

How Can I Transfer My Mortgages to My LLC?

By River Braun, J.D.

There are several important steps you need to take before transferring a mortgage to your limited liability company (LLC). Always check with your mortgage lender first to ensure transfers are allowed. If they are not allowed, there are other options to get the mortgage out of your name and into your LLC.

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Assumption of Mortgage by Others

Some mortgages permit for an assumption by a new borrower. This means that the new borrower becomes legally liable for payment of the debt and the original borrower is released from liability. Therefore, the first step you should take is to review your mortgage carefully to determine if it allows for an assumption of the debt. If it does, you may be able to transfer title to the property and the mortgage to your LLC.

However, in some cases, a mortgage includes a clause that calls for an acceleration of the debt if the property's title is transferred to another person or entity. If your mortgage contains an acceleration clause and you transfer the property to your LLC, the lender could require the entire balance of the loan to be paid in full immediately.

In either case, check with your mortgage company before shifting a mortgage to your LLC. Some companies may allow you to make this transfer even if there is an acceleration clause. But they may continue to hold you liable for the mortgage even after the transfer. This is because some lenders require a personal guarantee when an LLC borrows money. Contacting the mortgage company before you take any steps is essential to avoid issues later on.

Transferring the Mortgage to the LLC

Once you file the documents to organize your LLC with your state, the company becomes a legal entity that can enter into contracts and borrow money in its name. This means your LLC can also hold title to real estate.

If your mortgage company allows your LLC to assume the mortgage, the first step is to prepare a deed transferring ownership of the property. The lender requires that the LLC sign an assumption of mortgage that creates a legal obligation for the debt between the mortgage company and the LLC. The assumption of the mortgage must be filed with the county real property offices with the deed transferring title to the property.

Selling the Property to the LLC

If the mortgage company does not allow for an assumption of the mortgage, you can sell the real estate to the LLC. However, the LLC would need to qualify for a mortgage in its name to purchase the property.

If your current mortgage company does not accept a loan in your company's name, you can check with other lenders. Once you obtain a loan commitment, you can schedule a real estate closing to transfer the property and for the LLC to execute the mortgage documents.

Transferring a mortgage to an LLC has its benefits but is not always a straightforward process. Read your mortgage terms carefully before enacting a transfer. Even if your mortgage company prohibits transfer to third parties, there are ways around these restrictions.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.