Transferring mortgage and deed to a LLC

[Jeremy Scherer]

I'm closing on my second SFH this month in west Michigan (Grand Rapids). I'm looking long term and decided to set up an LLC (2 actually, but long story). Now that the LLCs are set up I want to transfer the mortgage and deed on the first one into the LLC. The lender will not allow this, even if I personally guarantee the loan. They told told me to pay it off and refinance with another lender. I called twice to see if I got the same answer both times. The broker I'm using now on the second property says this lender will allow it post close, no issues. Obviously I've learned my lesson and know to watch out for this in the future. Any ideas or suggestions for me regarding the first property with the lender that won't allow the transfer. Thanks, Jeremy

[Jeremy Scherer]

The mortgage broker was wrong. He didn't understand what I was asking.

After doing more research I think I may have gotten to the bottom of this. I think the issue is not the lender you use or that they all have the same clause, but that the majority of these loans are conventional government backed loans. All of the Freddie and Fannie backed loans are for personal use, and transferring to an LLC, means it would be used for a business.

It seems like the only legal way to have the deed, mortgage, and lien in the LLC name is to do a commercial loan. This can still be done on a residential property, it just requires more money down a little higher rate, and a shorter term.

I think this is where I have heard people talking about using the limited amount of residential loans you can get in your name as "parking spots" until they are able to transfer everything to the commercial side. For example, secure the loan originally as a conventional loan, and once you are in a better equity position (mortgage pay down and appreciation) refinance into a commercial loan.

I'm glad I'm trying to figure this out as I go. If I tried to do it all ahead of time I may have never gotten started.