Be Honest With Your Lender

Thursday, April 13th, 2006 at 7:18 pm

A short post. As discussed, most home mortgages have a "Due on Sale" clause which permits the lender to call the loan due if ownership of the home is transferred to another party.

Do not set up a fictitious deal to mislead the bank about what you are doing. Do not do this! Do not even think about misrepresenting what you are doing to the lender. This is fraud and can result in severe criminal penalties. Ever hear of Martha Stewart or Enron?

Some advisors will have you jumping through hoops to set up a title holding trust to get around the Due on Sale clause. In my experience this isn't really necessary. I have never heard of a loan actually being called due because of a "Subject To" financing deal. It could happen, I just have never heard of it. The banks want their money and litigation simply costs them money. They do not like that.

When dealing with the bank be honest. Tell them that you will be making the payments in the future. They will more than likely change their records and be happy to take your money!