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Refinancing Your Home May Cost You More Than You Think

By November 17, 2011October 24th, 2018Estate Planning Blog, Robert Lamm

Robert Lamm

With record low interest rates, homeowners are rushing to refinance their mortgages.  With 30-year fixed rates averaging around 4%, who can blame them?   Moreover, with many lenders also offering to waive closing costs, it seems like it is just too good to pass up.

However, for homeowners that did the right thing by creating an estate plan and transferring their home to a trust, there lurks an undisclosed hidden cost – a potential probate that may result in thousands of dollars in attorney and executor fees.  Why?  Because lenders often require the borrower to transfer the home out of the trust before they will fund the loan.   This is fine so long  as the home is placed back into the trust after funding.  Unfortunately, all too often this last step is not completed, and if the borrower passes away before this error is discovered…..well, one of the purposes of the trust, the avoidance of probate, is defeated.

If you already have your house in a trust and are thinking about refinancing, don’t let this article discourage you.  Just make sure that at the end of the transaction, the house is put right back in the trust.