Complex Mortgage Problem?

d1lbert

My wifes father gave us a site (on which their cottage was on) on the condition that when we built a new house, we incorporate a granny annex / flat for my wifes parents to live in for the rest of their days.

My FIL also leant us the £275,000 needed to build the house. Actually, we are using funds from his account, to which my wife has access. So the money was never actually transferred to us.

Fast forward two years and the house is now complete, including an integral granny flat and its time to mortgage it and get the FIL back his cash. My FIL only wants £100K of the money back now, as we have been unable to sell our own house due to current market conditions and we plan on keeping it / renting it out, rather than sell it at a heavily discounted price. Also, he has no need for the remaining money at the moment, so it may as well be helping us out (his words). All well and good so far.

We have a provisional offer from the Halifax based in the mortgage being in my wifes and my names, and with our names on the deeds.

The solicitor representing us / her parents wants to include a 'life interest' clause that will guarantee my wifes parents residency for the rest of their days. This is really to protect them and give them 'security', should for example my wife dies, things turn sour and i try to sell the house or force them out. Thats not something i would ever do, but the solicitor feels its something that needs included.

He is also trying to include the outstanding balance of £175K as them having a financial interest in the house, should it ever be repossessed. The FIL has stated that the £175K is an interest free standalone loan and does not represent a shareholding in the house.

Now the problem is, the mortgage advisor tells us that the Halifax are likely to run a mile if the solicitor suggests a life interest clause as she thinks the Halifax would then be unable to sell the house if it were repossessed. The solicitor also thinks this. We have not necessarily struggled to get a mortgage offer but it hasnt been easy in the current climate.

So the problem is, if we try to put the life interest clause in, then we probably will be declined for the mortgage HOWEVER if we dont put it in, then my wifes parents interests arent protected, and the solicitor would insist an independent solicitor represents their interests - who will then insist on a life interest clause.

Basically, we most likely cant get a mortgage with the clause in, however we cant get my wifes parents agreement unless their interests are protected?


Help!

Cannon_Fodder

A joint mortgage, tenants-in-common, involving all 4 parties ? With declarations of trust/life insurance to cover all eventualities? Though there might be a problem with age of parents.

Off topic a little, but if the FIL has effectively "lost" £175K, he might want to seek some advice on the risk of it being classed as 'deprivation of assets' or having tax/CGT implications. The best way to address that could also affect the best way to address this issue.

Get your place rented out, on a BTL basis, so equity can be released from it, thereby foregoing the need to get a mortgage on the new place?

happybroker

Your solicitor should be able to run this past the Halifax without them "running a mile" assuming all of the facts in your post are already out in the open.

Cannon Fodder's suggestion may also have some milage in it.

Is your adviser independant or within the Halifax?

Thrugelmir

Can you raise the deposit and mortgage for the full £275k ?

VIGILANT22

Many factors to be considered here....'life interest' means 2nd charge...as for rest of days..............


http://www.ageconcern.org.uk/AgeConcern/Documents/FS40_Deprivation_of_assets_in_themeans_test_for_care_home_provision_April_2010.pdf

motorguy

happybroker wrote: »

Your solicitor should be able to run this past the Halifax without them "running a mile" assuming all of the facts in your post are already out in the open.

Cannon Fodder's suggestion may also have some milage in it.

Is your adviser independant or within the Halifax?

They arent aware of the requirement for a 'life interest' at this point.

Its an independent advisor.

motorguy

Thrugelmir wrote: »

Can you raise the deposit and mortgage for the full £275k ?

Technically we could, but it would mean financing an extra £175K, which if we dont have to at this point...

motorguy

VIGILANT22 wrote: »

Many factors to be considered here....'life interest' means 2nd charge...as for rest of days..............


http://www.ageconcern.org.uk/AgeConcern/Documents/FS40_Deprivation_of_assets_in_themeans_test_for_care_home_provision_April_2010.pdf

The plan would be that they wont ever have to go into a home, even if that means down the line some family care arrangement.

VIGILANT22

pgilc1 wrote: »

The plan would be that they wont ever have to go into a home, even if that means down the line some family care arrangement.

and you're point is?

motorguy

Cannon_Fodder wrote: »

A joint mortgage, tenants-in-common, involving all 4 parties ? With declarations of trust/life insurance to cover all eventualities? Though there might be a problem with age of parents.

Off topic a little, but if the FIL has effectively "lost" £175K, he might want to seek some advice on the risk of it being classed as 'deprivation of assets' or having tax/CGT implications. The best way to address that could also affect the best way to address this issue.

Get your place rented out, on a BTL basis, so equity can be released from it, thereby foregoing the need to get a mortgage on the new place?

Can you explain more of what you mean by your first paragraph?

The plan is to repay them the other £175K inside the next two years, ie, by remortgaging the new house further. Effectively its a short / medium term loan - they arent currently needing the money, and the idea (from her father) being that we neednt pay the full mortgage in the meantime.

The rental value of our own house is around £500 a month. The mortgage is for around £124K, so i cant see us being able to release any equity from there.

CloudCuckooLand

If you cannot convert your current residential mortgage to BTL, you may have trouble having sufficient income to support two mortgages.