You can transfer a mortgaged property to an LLC, but not quietly. Nearly every residential mortgage contains a due-on-sale clause that lets the lender demand the full balance the moment title changes hands without approval, and federal law does not shield LLC transfers the way it shields transfers into a living trust. The practical answer is that transferring a mortgaged property to an LLC requires your lender’s written consent first — or a refinance into a commercial loan held by the LLC itself.
What the Due-on-Sale Clause Actually Does
The due-on-sale clause appears in Section 18 of the standard Fannie Mae and Freddie Mac security instrument. It gives the lender the right to accelerate the loan — declare the entire remaining balance due at once — if you transfer any ownership interest in the property without prior approval.
Under Fannie Mae’s servicing guidelines, once the servicer identifies an unauthorized transfer, it provides 30 days’ notice to either pay the balance in full or qualify for a new loan. If neither happens, foreclosure proceedings begin.1Fannie Mae. Enforcing the Due-on-Sale (or Due-on-Transfer) Provision The Garn-St. Germain Depository Institutions Act of 1982 gives lenders the right to enforce these clauses and preempts any state law that would restrict them.2Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions
Lenders don’t always accelerate. But they can, and that’s the risk you take on the moment the deed is recorded.
Why LLC Transfers Aren’t Federally Protected
Garn-St. Germain lists nine specific transfers on residential property with fewer than five units where a lender cannot invoke the due-on-sale clause. The list includes transfers into a revocable living trust where you remain a beneficiary and continue living in the home, transfers to a spouse or children, transfers on death, and transfers resulting from divorce.
Transferring to an LLC — even a single-member LLC you wholly own — is not on the list.2Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions This is the point most investors get wrong. The trust protection does not extend to LLCs by analogy. Without lender consent, moving title into your LLC gives the bank the legal right to call the loan.
How to Get Lender Consent
Contact your mortgage servicer in writing and request permission to transfer the property to your LLC. Some servicers routinely approve these requests for asset-protection purposes when the original borrower remains a member of the LLC and stays personally responsible for the debt. Others require a formal assumption agreement or a processing fee. Some refuse.
Have these documents ready before you ask:
- Your LLC’s Articles of Organization
- The operating agreement
- The LLC’s Employer Identification Number from the IRS
The lender wants to confirm that you control the entity and that the transfer does not increase its risk. If the servicer agrees, get the approval in writing and keep it with your permanent loan records. Bank policies change; a signed approval letter is your proof, years later, that the transfer did not violate the loan terms.
If the Lender Says No: Refinancing Into a Commercial Loan
The main alternative is refinancing into a commercial loan held by the LLC. Commercial loans typically carry higher interest rates than residential mortgages, and closing costs can be substantial. The math tends to work best for investment properties where rental income can absorb the higher debt service.
Before committing, add up the higher rate, the closing fees, and any prepayment penalty on your current loan, then weigh that total against the liability protection you’re buying. On a property with thin equity or modest rent, the added cost can outweigh the benefit.
The LLC Doesn’t Get You Off the Mortgage
Transferring the deed to your LLC does not remove your name from the mortgage. The loan is a personal obligation you signed. Changing who holds the title does not change who signed the note. If the property later goes into foreclosure and the sale doesn’t cover the balance, the lender can pursue you personally for the difference in states that allow deficiency judgments.
Even when you refinance into a commercial loan under the LLC, most lenders will require you to sign a personal guarantee. The LLC structure can protect you from liability tied to the property itself, such as a tenant’s injury claim, but it does not shield you from mortgage debt you have guaranteed.
Tax Consequences to Check Before You Record
Real Estate Transfer Tax
Some states and counties charge a transfer tax when a deed is recorded, calculated as a percentage of value or purchase price. Rates run from zero in states with no transfer tax up to around 3% in states with progressive structures. Many jurisdictions exempt transfers to a wholly-owned LLC because no real sale has occurred, but you generally have to claim the exemption at filing. It is not applied automatically.
Property Tax Reassessment
Some jurisdictions treat a transfer to an LLC as a change of ownership that triggers a reassessment of taxable value. If the property has appreciated significantly, that can raise your annual tax bill. Other jurisdictions exempt transfers where the same person retains full ownership through the entity. Confirm your local assessor’s rule before recording.
Federal Income Tax
A single-member LLC is treated as a “disregarded entity” by the IRS, meaning the federal government ignores the LLC and treats the property as if you still owned it personally.3Internal Revenue Service. Limited Liability Company (LLC) Transferring property into a disregarded LLC is not a taxable event. Your basis carries over, and income and expenses stay on your personal return.
If the property is your primary residence, IRS regulations specifically provide that a home owned by a single-owner disregarded entity is treated as owned by the individual for purposes of the Section 121 capital gains exclusion.4eCFR. 26 CFR 1.121-1 – Exclusion of Gain From Sale or Exchange of a Principal Residence You can still exclude up to $250,000 of gain, or $500,000 if married filing jointly, when you sell, provided you meet the two-out-of-five-years ownership and use requirement.5Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
A multi-member LLC defaults to partnership taxation unless it elects otherwise on IRS Form 8832.6Internal Revenue Service. LLC Filing as a Corporation or Partnership Partnership treatment generally avoids gain recognition on the transfer. If the LLC has elected corporate taxation, the transfer is treated as a sale to the entity, which can trigger capital gains and depreciation recapture.
Gift Tax
If anyone other than you holds a membership interest in the LLC, you may have made a taxable gift equal to that person’s share of the property’s fair market value. Transferring a $400,000 property into an LLC where your adult child holds 50% is effectively a $200,000 gift. Gifts above $19,000 per recipient in 2026 require a gift tax return, though no tax is owed until you exhaust your lifetime exemption.7Internal Revenue Service. Tax Inflation Adjustments for Tax Year 2026 A sole-member LLC creates no gift because you retain 100% ownership.
Picking the Right Deed and Protecting Your Title Insurance
A quitclaim deed transfers whatever interest you happen to have, with no promises about the title’s condition. A warranty deed guarantees the title is clear of undisclosed liens or claims. Either can move the property into your LLC, but the choice affects what happens to your title insurance policy.
Title insurers often stop covering the new owner after a quitclaim deed because the deed itself carries no warranties. A warranty deed tends to preserve coverage because the grantor stays on the hook for title defects. When the LLC is wholly yours, many insurers keep the existing policy in force without extra steps; when other members are involved, you may need an endorsement naming the LLC as an additional insured. Call your title company before you record. Discovering a coverage gap after a title defect surfaces is expensive.
Whichever deed you use, it must include the full legal description copied from your original deed or tax records (not just the street address), the exact LLC name on file with the Secretary of State, the LLC’s EIN,8Internal Revenue Service. IRS Publication 1635 and a signature from someone with documented authority to act for the LLC. Confirm the LLC is in good standing before recording. An administratively dissolved LLC is not a legal entity, which means the transfer has no valid recipient.
Recording and the Updates That Come After
Once the deed is signed and notarized, file it with the county office that maintains land records. After recording, the LLC holds legal title as a matter of public record. Then keep going, because the paperwork trail has to match the new ownership everywhere it appears:
- Send the mortgage servicer a copy of the recorded deed so their records are current. Otherwise your year-end Form 1098 mortgage interest statement can be issued under the wrong name or taxpayer ID.9Internal Revenue Service. About Form 1098 – Mortgage Interest Statement
- Update your property insurance to name the LLC as the insured or add it as an additional insured. A policy that still lists only you can be grounds for a denied claim once you no longer hold title.
- If the property is rented, move utility accounts and tenant leases into the LLC’s name. That reinforces the legal separation between you and the business.
What It Costs to Keep the LLC Running
Holding property in an LLC creates recurring obligations. Most states require an annual or biennial report and a filing fee to stay in good standing. Fees run from $0 in a handful of states to over $800 in the most expensive, with most states below $100. Miss the deadline and the LLC can lose good standing and, eventually, face administrative dissolution.
You may also need a dedicated bank account, a registered agent in the state of formation, and a separate tax return if the LLC has more than one member. On a property that produces little or no income, these ongoing costs are worth pricing out before you move title at all.