In what sequence should I do these tasks?

Question

I bought a house as an unmarried individual with a conventional mortgage. Years passed, i gained a spouse and child, and the three of us live in the same house. Now I want to do the following things:

• Change the title to make my spouse a co-owner.
• Create a trust as part of estate planning, and put the house in the trust.
• Refinance the mortgage (jointly).

What is the optimal order for doing these? It seems that changing any one affects the other two, which would require revising recently created documents.

Answer 1

You need to change the title first because you can't refinance the mortgage jointly if your significant other isn't on the title

Assuming that it's your trust (not joint), I don't think that the order would matter because your will in your trust will dictate what beneficiaries get your equity value of the house regardless of whether you own half or all of it and it's irrelevant to the trust what the rate you are paying for your mortgage. Once the title situation is rectified, your might tackle the trust next since updating your will to protect your loved ones might be a priority.

Your should speak with your lawyer to make sure that what I/we/you think is the best approach

Answer 2

Start by talking with person who is going to create the trust. They know the order that will minimize the cost to you.

Besides cost a potential issue is that some lenders will not approve a loan for a house owned by a trust. If the house is already in the trust you might have to remove the home from the trust, then get a new mortgage, and then put it back in the trust.

I have heard that some lenders see the change of title as an event that requires to you to payoff the loan. I don't think that is still an issue but it was a long time ago.

I do know that we were able to add my spouse to the ownership documents when we refinanced. It was a trivial operation.

I would start with your advisor, so that they can lead you through the steps, thus avoiding wasted steps or having to add steps to the process because they were done in the wrong order.