Subject to my own house to my business

[Tristyn Brown]

Hi, I started my journey with becoming an accidental landlord. I now have decided to form an LLC and get serious with Real Estate. I want my current house to be under the business, I'm thinking of having my attorney draw up subject to contract for the business to start taking over the mortgage. My attorney mentioned that some mortgage companies will have a problem with that and may lead to losing your mortgage. Has anyone had a similar situation or have advise for my situation?

[William Morgan]

Disclaimer: not legal advice.

If you are transferring ownership to your LLC it will trigger the "Due on Sale" provision of your mortgage which gives the lender the right and option to call the loan immediately due and payable in it's entirety. This is also sometime referred to as an acceleration clause. The bank will not automatically call the loan "Due" ( i.e. accelerate the loan) but it has the right to do so and probably will if it notices the transfer.

I assume you want the liability protection of your LLC? Increasing your insurance and buying an umbrella policy is probably a better, cheaper, more effective way to go if you just own one property.