The Background
Many people transfer real property (like your home) to a living trust that they create. There are also many transfers of second homes, investment property and similar property to limited liability companies or other entities specifically designed to hold property. With the right planning and preparation, these transfers go smoothly and achieve strategic legal objectives. Indeed, federal law generally allows people to transfer their primary residence to a trust they own. 
What is the trap?
For real property that is mortgaged, those transfers you make to your trust or limited liability company could trigger the “due-on-sale” clause in your mortgage. This means that your lender could foreclose on a current loan upon transfer to another. Whether the lender choose to call the loan or not, the right would exist and this puts you at risk. Here is what a typical due-on-sale clause might look like: 
This most often happens when people own multiple investment properties plus a home, all of which are mortgaged. The transfer of the home by quit claim deed to a trust is usually not a problem. However, transferring the remaining investment properties to a limited liability company may trigger the due-on-sale clause because it could be considered a “sale”.
What to do?
1. Review your mortgage and promissory note to determine if there is any provision that would be triggered by a transfer; and
2. If the documents contain a limitation, seek permission from the lender, in writing, before making the transfer.
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