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if there is a mortgage, there may be due on sale clause.
if there is a mortgage, you lose all ability to deduct interest paid on the loan.
if you want not to be personally responsible (liable) for some action, then this would be a sham and a judge would see right thru it.
We don't want to be liable that is why we have a LLC, but I spoke with a mortgage broker who suggested to put it in our names and do a quit claim deed after a few days and put it in the LLC, that saves a lot of closing costs and we will get better rates, that is the reason they suggested it. We want to put the LLC immediately on the deed, but have time to get a mortgage before closing and we can pay cash, so we don't mind.
Thanks for your help and hope you can help out a little bit more, because we don't want to do something that is not right.
I am surprised the mortgage broker would suggest that since legally you are selling the property to a different entity (even though it is still you). The llc is a separate entity which is what gives you the legal protection. I would be concerned that it would trigger the due-on-sale clause. Then technically you would have to write a separate mortgage document that would be the wraparound mortgage since you would be making the payments and not the llc. The llc would be paying you, not the lender.
Purchasing it as a corporation does cost more, but you need to weigh the risk associated with it. I would talk with your attorney, as I would be concerned that purchasing the home to get the better interest rate as a non-corporation would create complications for your llc later on. Keeping the business arms length from your personal monies is essential. Sometimes it is better to do things by the book.
You can usually get a blank quit claim deed thru the county clerks office and do it yourself. Quit claims raise eyebrows if done too many times. I would encourage you to get title insurance at the same time in case you ever decide to sell it as it might make it easier for the next guy and less possible future hassle from a title company for a buyer asking for title insurance.
We don't want to be liable that is why we have a LLC, but I spoke with a mortgage broker who suggested to put it in our names and do a quit claim deed after a few days and put it in the LLC, that saves a lot of closing costs and we will get better rates, that is the reason they suggested it. We want to put the LLC immediately on the deed, but have time to get a mortgage before closing and we can pay cash, so we don't mind.
Thanks for your help and hope you can help out a little bit more, because we don't want to do something that is not right.
By doing this, the mortgage broker could be giving you very bad advise. Legally taking the title out of your name, and "selling" it to a corporation, could trigger a due on sales clause in most mortgages.
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