Should you update your will after refinancing your home?

Refinancing your mortgage feels like a solid financial win. You shop around for a better interest rate, lock it in, and suddenly you're saving a good amount of money each month. It’s one of those smart money moves that just feels right.

But here’s an issue many people overlook: that great decision for your finances can accidentally cause significant problems for your estate plan. The paperwork you sign for that new rate often involves changing the legal title of your property. This one small step can pull your home out of your living trust or, even worse, completely override the wishes you’ve carefully laid out in your will.

This guide will walk you through why it's so important to review your estate plan after refinancing. We'll give you a clear, straightforward checklist to make sure your home, probably your biggest asset, is protected and ends up exactly where you want it to.

Understanding property titles and your will

Here’s a detail about property law that can be confusing: when it comes to your house, the name on the property title (the deed) is the ultimate authority. It carries more legal weight than what you’ve written in your will.

This conflict usually comes down to how you own the property with someone else. Let’s look at the two most common forms of joint ownership, because getting the difference is key to avoiding some significant estate planning issues.

Joint tenancy vs. tenants in common: Why the deed can override your will

Joint Tenancy with Right of Survivorship (JTWROS): Think of this as the "last one standing gets it all" type of ownership. When you own a property as joint tenants, everyone has an equal share. If one owner passes away, their share automatically goes to the surviving owner(s). This is called the "right of survivorship," and it’s a powerful legal rule.

The most important thing to know is that a valid right of survivorship always overrides a Will. The property transfer happens instantly and outside of your estate, which means it doesn't go through the courts.

Tenants in Common (TIC): This is more like having separate, distinct shares in the same property. As tenants in common, you can own unequal portions (maybe 70/30), and your share is treated as your own personal asset. When you pass away, your share doesn't automatically go to the other owners. Instead, it’s passed on to the beneficiaries you’ve named in your will. This means your part of the property has to go through the probate process.

To illustrate the key differences, here's a breakdown:

Here’s a quick table to make it clearer:

The hidden trap of refinancing and estate planning

So, how does all this tie into your mortgage? The problem often starts when you’ve done the right thing and set up a living trust to hold your property, which is a great way to avoid the time and cost of probate court. But during a refinance, your lender will almost always require you to temporarily move the property out of the trust.

Why lenders ask you to take your home out of your trust

It sounds a little odd, but it’s standard practice. Lenders just prefer to issue loans to individuals rather than to trusts. To do this, they’ll ask you to sign a new deed that transfers the property from the name of your trust back into your personal name(s).

You might worry this could trigger a "due-on-sale" clause in your mortgage, but you can relax on that front. A federal law called the Garn-St. Germain Act generally stops lenders from doing this when a homeowner transfers their property into a living trust where they are still the beneficiary.

Once the new loan is all set, the property is supposed to be transferred right back into the trust with another new deed. But that’s exactly where things often go wrong.

The common mistake: Forgetting to put your home back in the trust

That last step, retitling the property back into your trust, is incredibly easy to miss. Sometimes the lender forgets, sometimes the title company drops the ball, and a lot of the time, homeowners simply don't realize they need to follow up on it.

The result of this simple oversight can be significant. If you pass away while the home is still titled in your personal name, it's no longer under the protection of your trust. The property will almost certainly have to go through the time-consuming and expensive probate process, which is the very thing you were trying to avoid by setting up a trust in the first place.

Some people have a "pour-over will" which acts as a safety net to catch any assets left outside a trust and "pour" them in after death. It’s a good backup, but there’s a catch: the property still has to go through probate first before it can be moved into the trust.

How a simple signature can disinherit your children

Let’s look at a real-world example that is a common scenario, especially with blended families.

Imagine a mother owns a home with her new husband as "tenants in common." In her will, she clearly states that her 50% share of the house should go to her children from her first marriage. Everything is set up just right.

Then, they decide to refinance. The title company prepares all the closing documents and includes a new deed that retitles the home in both their names as "joint tenants with rights of survivorship." In the rush of signing multiple documents, they don't notice the change.

If the mother passes away, the right of survivorship kicks in immediately. Her husband automatically becomes the sole owner of the entire property. Her will is now completely irrelevant for the house, and her children get nothing. A simple signature has unintentionally disinherited them.

Should you update your will after refinancing?

After all that, you’re probably wondering what the right move is. The answer is a definite yes, but it’s about more than just your will.

Reviewing your entire estate plan is key

Let's get straight to the point. After any refinance, the very first thing you need to do is verify your property's title. This is even more important than tweaking your will. You need to confirm that the title is correct, whether that means it’s safely back in your trust or listed as "tenants in common" to match your wishes.

Once you’ve confirmed the title is right, then it’s time to look at your will. A refinance is a big financial change. Does your will still reflect how you want the new, larger mortgage to be handled? Is your chosen executor still the right person for the job? This is the perfect time for a quick check-in to make sure everything is still in order.

Other life events that require a will update

Refinancing is a big one, but your estate plan isn't a document you should sign once and then forget about in a drawer. It's a living plan that should change as your life does.

Here are a few other common moments when you should give it a review:

• Marriage, divorce, or a new partnership: Big relationship changes bring new legal obligations and mean you'll likely need to update beneficiaries and executors.
• Birth or adoption of a child: You'll want to name a legal guardian for your child and make sure they are included as a beneficiary.
• Significant financial changes: Coming into an inheritance, selling a business, or buying another property are all good reasons for an update.
• Death of a beneficiary or executor: You need to name replacements to ensure your plan can still be carried out as you intended.
• Changes in key relationships: If you're no longer close to a beneficiary or your chosen executor isn't suitable anymore, your will needs to reflect that.

Keeping your will updated used to mean expensive trips to a lawyer's office. Thankfully, that’s not the case anymore. Platforms like Willfully make it simple and affordable to create an Australian Will online, and it even includes 12 months of free, unlimited updates for exactly these kinds of life changes.

Your post-refinance estate planning checklist

Feeling a bit overwhelmed? Don't be. Here’s a practical, step-by-step checklist to help you get through the process and protect your assets.

Before you sign the loan documents

• Ask your lender upfront about their policy for properties held in a trust. While most require taking the property out, some may not, which could save you a step.
• Be proactive. Clearly tell both your lender and the title company that the property must be put back into the trust as soon as the loan closes. Get it in writing if you can.

During the closing process

• Read everything you sign. If you see a document deeding the property out of your trust, ask to see the corresponding document that deeds it back in.
• The title company might charge a small fee for preparing the second deed. Don't try to save a few dollars here. It's nothing compared to the potential thousands in probate costs.

After the refinance is complete

• This is the most important step. Wait a few weeks after closing, then contact your local land titles office to get an official copy of the new deed. Double-check that your trust is listed as the legal owner or that the title is held exactly as you intended.
• Once you’ve confirmed the title is correct, pull up your will and other estate documents. Read through everything to ensure it all still reflects your current wishes and financial situation. With an easy-to-use online platform, this review can be done in minutes from your couch.

Protecting your estate plan after refinancing

Refinancing your home is a great financial tool, but it requires a bit of attention to make sure it doesn't create problems for your estate plan. The most common mistakes, failing to retitle your home back into a trust or accidentally changing the ownership type, can completely derail your wishes for the future.

Your estate plan isn't a "set it and forget it" task. Think of it more like a regular check-up for your legacy. Reviewing it after major financial decisions or big life events is the best way to protect your assets, your family, and your peace of mind.

To avoid oversights that can affect your family's future, using an online platform like Willfully can be a straightforward and affordable way to create or update a your legal Australian Will. Keeping your plan current is simpler with features like included updates, helping to secure your peace of mind.