Refinancing a Property Held in Trust in Ontario: What Lenders Require

Refinancing a home or investment property is usually a fairly routine process — until the property is held in trust rather than in an individual's own name. When a trustee, rather than a beneficial owner, sits on title, lenders ask a different set of questions before they'll approve and register a new mortgage. Understanding what they're looking for, and what a trustee is actually authorized to do, can save weeks of back-and-forth.

This article walks through why trust-held property gets extra scrutiny, what documentation lenders typically request, and how the refinancing process generally unfolds.

Why Trust-Held Property Is Different

When a property is held in trust, the person or entity named on title (the trustee) isn't necessarily the person who actually benefits from the property (the beneficiary). That separation is the whole point of a trust — but it also means a lender extending a new mortgage needs to confirm two things before it will advance funds:

• That the trustee actually has the legal authority to mortgage or encumber the property on the trust's behalf
• That the mortgage won't improperly harm the beneficiary's interest in a way the trust document doesn't allow

Ordinary refinances skip this step because the person signing the mortgage and the person who benefits from the property are the same. Trust-held refinances can't skip it.

What a Trustee's Authority Typically Depends On

A trustee's power to refinance isn't automatic just because their name is on title. It generally depends on:

• The terms of the trust document itself — many trust deeds explicitly grant (or limit) the trustee's power to borrow against or encumber trust property
• Whether all named trustees, if there's more than one, are joining in the transaction, since trustees often must act jointly rather than individually
• Any conditions the trust places on transactions that affect a beneficiary's interest, particularly where the beneficiary is a minor or otherwise unable to consent personally

For a bare trust arrangement — where the trustee holds title purely as a nominee and the beneficial owner directs everything — lenders may focus more on confirming the beneficial owner's involvement and consent, since that person is typically the one actually responsible for the debt in substance.

Documents Lenders Commonly Request

Before approving a refinance on trust-held property, expect a lender (or your own lawyer) to ask for some combination of:

• [ ] A copy of the trust document, or at least the provisions dealing with the trustee's borrowing and encumbrance powers
• [ ] Confirmation of who the current trustee(s) and beneficiary(ies) are
• [ ] Evidence that all necessary trustees are signing, or a resolution/consent authorizing one trustee to act
• [ ] Independent legal advice for a beneficiary, in some circumstances, confirming they understand and consent to the transaction
• [ ] A statutory declaration or solicitor's opinion confirming the trustee's authority to enter into the specific mortgage

Exactly which of these a lender requires varies by lender, by the type of trust involved, and by the specific facts — a family trust holding a cottage looks very different from a bare trust used to simplify a corporate holding structure.

How the Process Generally Unfolds

1. Confirm the trust structure early. Before you approach a lender, have your lawyer review the trust document to identify who must sign and what authority actually exists.
2. Disclose the trust to the lender at application. Trying to refinance without flagging that title is held in trust tends to cause delays once the lender's own title search reveals it.
3. Gather the requested trust documentation. Lenders move faster when the trust deed, trustee resolutions, and beneficiary consents (if needed) are ready before underwriting begins.
4. Address any independent legal advice requirements. If a beneficiary needs separate legal advice before consenting, build that time into your timeline.
5. Close and register the new charge, with your lawyer confirming the mortgage is registered against the correct trustee(s) as titleholder and that any existing charge is properly discharged.

When Beneficiaries Need Independent Legal Advice

Where a proposed refinance could affect a beneficiary's interest — for example, increasing the debt secured against a property they stand to inherit, or that they occupy — a lender or the trustee's own lawyer may insist that the beneficiary get independent legal advice before the transaction proceeds. This protects everyone involved: it reduces the risk that the beneficiary later argues they didn't understand or agree to what happened, and it gives the trustee a documented record that the beneficiary's interests weren't overlooked.

Frequently asked questions