If there is a loan on my property, can I add someone to the deed?
Many times we are asked the question: “If there is an existing loan on my property, is it okay to add someone to title?” In practice this happens quite often, usually without any consequences… but is it “okay”? A review of your loan documents will reveal if this is risky action!
Most loans include a “due on sale” clause that says the original borrower transferring title (or any portion/percentage of the title) gives the lender the right to call the loan all due and payable.
If you are concerned about violating the terms of the loan, ask your lender for consent! If the lender agrees to the change in the Deed, follow up by asking your lender to put their consent in writing. This will ensure you don’t have anything to worry about.
If I add someone to title, does that make them responsible for the loan as well?
Many Owners assume that if they add someone to the Deed, the new Owner is also obligated to repay the loan. This is not the case. Unless your lender modifies the loan documents and your new Owner signs the loan modification, the new Owner is not on the hook for your loan. You alone remain solely and fully responsible for the repayment of the debt to the lender. Here’s another post with a bit more detail on this subject.
Without adding someone to the title of my property, is there another way to name the person I want to have my property in the event of my death?
Very often the motivation behind adding someone to the deed is really to make sure that the property transfers to a spouse or another family member. If this describes you, consider a Beneficiary Deed.
Because title does not actually transfer when a Beneficiary Deed is recorded, this Deed would not violate the terms of your loan.
Other benefits to the Beneficiary Deed are (a) you can change your beneficiary, or add new beneficiaries at any time prior to your death; (b) you do not need to have your beneficiary approve or agree to the sale or refinancing of the property; and (c) the Beneficiary Deed will avoid probate.
There are things to consider before you add someone to the title of your property. Check with your lender to make certain you are not violating the terms of your loan, and always keep in mind the option of using a Beneficiary Deed.