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In "Joint Tenancy" there is a loan or refinance loan taken out by one of the owners, upon death, then how is loan repaid?

Los Angeles, CA |

My concern is that my trust will have to pay off a loan that I have refinanced on a property where I am in joint tenancy? Does the survivor from joint tenancy on a property become responsible for the refinanced loan?

Attorney Answers 1

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The loan is repaid by the remaining joint tenant according to its terms. The law prevents the lender from calling the loan due pursuant to a due-on-sale clause, provided the loan is secured by a lien on residential real property containing less than 5 units.

See, Garn-St. Germain Depository Institutions Regulation Act, 12 U.S. Code § 1701j–3 - Preemption of due-on-sale prohibitions

“(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—

(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety….”

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