How to Set Up a Trust for a House Mortgage

The assets in a trust can be used as legal collateral against which you can apply for a house mortgage. However, lenders are wary about lending against a trust due to the complexity of trust transactions and the high risk involved. But if you set up the appropriate trust and transfer your asset to the fund, you may be able to convince the lenders to grant you a house mortgage. It is advisable to establish an irrevocable living trust to persuade the lenders that you will not change the terms of the trust or transfer assets from the trust.

Things You'll Need

• Living Trust Forms
• Trust Deed transfer forms
• Attorney

Instructions

1. Account for the worth of your assets by listing each asset -- starting with liquid assets -- that you own such as bank accounts, and then apportion a dollar value to each. Do the same for personal tangible assets such as antiques, land or a car. Calculate your liabilities by listing the amount you owe in loans and taxes. Add your total liabilities and subtract them from your total assets to establish the worth of your trust.

2. Obtain the legal forms for a living trust from an attorney, by purchasing from a stationery shop or by downloading them from online sites such US Legal. Note that an attorney is more likely to provide you with the appropriate forms and advise you on how to fill these in. Complete the form by providing information such as the name of the person creating the trust, the name of the person who will take care of the trust on your behalf in the event of death, a successor trustee and the name of beneficiaries to the trust.

3. Indicate in the trust that this is an irrevocable living trust. Write a clause that allows the trustee -- you and any other named person -- to borrow, sell or invest against the assets in the trust. Give an attorney this document to read through and to advice you about the content of your document. Sign the living trust in the presence of a notary public such as an attorney.

4. Transfer your assets to the living trust to enable you to pledge these assets as collateral against the house mortgage. Prepare a trust transfer deed to transfer real property such as land to the trust. Obtain the legal forms from your local Registry of Deeds and fill them in by providing information such as the name of the grantor (your name), the purpose of the transfer (transferring property to a trust), the name of the grantee (name of your trust) and a brief description of the property. Date the trust transfer deed and sign it in the presence of a notary public.

5. Visit your bank where you have your accounts and other institutions such as brokerage firms that trade your stocks of a publicly-owned company on your behalf. Request them to transfer your accounts and stocks to your trust.

6. Find a mortgage lender through a real estate agent or by visiting the bank where you have a checking or savings account with. Discuss with the lender about the assets in your irrevocable living trust; present the lenders with your trust and all documents showing you have transferred the assets in your trust.

Tips & Warnings

• Note that, regardless of your trust, you will have to meet the requirements of your mortgage lender before qualifying for the mortgage.

• Trust transfers are complex and it is highly advisable to use an attorney for advice and guidance.

References

• Robert G. Allen; Living Trusts, Why We Need it and How to Set It Up; The Living Trust Kit; J.J. Childers
• Living Trust Network: Transferring Intangible Personal Property into a Living Trust
• Nolo; Making a Living Trust; Can You Do It Yourself?
• Bank Rate; Finding the Best Mortgage Lender; Elizabeth Razzi;
• Dummies; How To Transfer Real Estate Into a Trust; Margaret Atkins Munro and Kathryn A. Murphy;
• US Legal: Living Trusts Forms