Whenever someone calls me to transfer their real estate to someone, add someone to title, remove someone from title, transfer to an LLC, transfer to a trust etc. My first question is always the same: is there a mortgage on the property? When you transfer real estate encumbered by a mortgage, you are probably going to incur documentary stamp taxes unless an exception applies, and you may run afoul of your mortgage requirements if you do not obtain your lender’s consent for the transfer.
Documentary stamp tax – Documentary stamp tax is a tax levied by the State of Florida on transfers of real estate. If there is a mortgage on the property, then there will likely be documentary stamp tax due when transferring the property.
The documentary stamp tax amount is $0.70 per $100 of the mortgage for every county in Florida except Miami-Dade County. In Miami-Dade County, the tax amount is $0.60 per $100 of the mortgage for single-family residences, and there is an additional surtax of $0.45 per $100 of the mortgage when the transferred property is not a single-family residence.
There are very few exceptions to paying documentary stamp tax when transferring property encumbered by a mortgage. The most common exceptions are (1) adding or removing a spouse from title or (2) transferring the property to the owner’s revocable living trust.
Lender consent – Altering title to property encumbered by a mortgage without your lender’s consent can trigger certain penalties in the mortgage, including your lender having the option to demand the entire balance of the mortgage immediately due. Most mortgages require that title to the encumbered property not be altered without written consent from the lender. As a general rule of thumb, if you are planning to change title to a property encumbered by a mortgage, always obtain your lender’s consent.