How does a Declaration of Trust affect a mortgage application?

superbabe612

Advice please!

My father-in-law is giving me & my OH the proceeds of his house sale as a large deposit on another property (for him to join us if he's well enough to leave his nursing home).

We are awaiting a mortgage offer from the Halifax for a 38% LTV (borrowing £70k of £183k purchase price).

Our solicitor has recommended that we have a Declaration of Trust to protect FIL's interest (£90k; the rest comes from joint savings). (We were going to call it a 'gift' but FIL may not have capacity; his care is NHS funded so there is no deprivation of assets)

How 'loosely' (ie the least restrictive) can we have the Trust Deed worded (basically if the house is sold, FIL gets his money back)?

Would the Halifax object to this? Would they think that they are lending £70k of a £93k share (75% LTV) and therefore adjust the interest rate or even withdraw the offer?

Any mortgage brokers/lenders out there with any advice?

Senior_Paper_Monitor

Depends on the structure of the Declaration of Trust - right to force sale etc

Gifting if he is in a home may be a real problem - deprivation of assets. Not gifting will set off alarms at the lender.

Sounds like a complicated one !

kingstreet

This needs specialist legal and financial advice.

I suggest you steer clear of executing this idea until such times as you have formally had capacity established.

Not only does this have deprivation of assets implications, it may also be considered financial abuse and you could end up on the end of a vulnerable adult investigation by the Police and/or Social Services.

Tread very carefully.

Senior_Paper_Monitor

I rather flicked through this one in my initial reply and probably didn't stress the level of complexity and serious/multiple implications sufficently.

I thoroughly endorse Kingstreet's expanded list of issues - a minefield !!

superbabe612

Would it be possible to add my FIL to the mortgage application so his name can go on the title deeds? Can you have 3 people named on a mortgage?

kingstreet

superbabe612 wrote: »

Would it be possible to add my FIL to the mortgage application so his name can go on the title deeds? Can you have 3 people named on a mortgage?

Yes, but if he lacks capacity you cannot have him become party to any contract.

We have a similar situation ongoing at the moment. For example;-

A Principal Clinical Psychologist has diagnosed mixed dementia (vascular dementia and Alzheimer's disease) leading to a profound cognitive impairment.

As a result, the individual is deemed incapable of making a decision, understand the nature of the financial transaction, know the nature and extent of his assets and was extremely dysphasic and not able to communicate in a meaningful way.

In your case, if he is required to sign any documentation, the solicitor handling the matter will be duty bound to ensure he has the mental capacity to understand the implications of his actions and that may simply not be possible.

I suggest you spend some time researching mental capacity, the Age UK website, Public Guardian, the Court of Protection and sites related to "safeguarding vulnerable adults".

superbabe612

Thanks, that actually clears things up! If a solicitor would need to ensure he has the mental capacity to sign for a mortgage, we may as well go down the 'gift' route, which doesn't tie him to a mortgage. It's what he wanted in the first place!

superbabe612

Just an update - our solicitor has been to see my FIL, & says he does have the mental capacity to make decisions and that he is happy to 'gift' us the proceeds of his house sale for our onward purchase.
Even though he can seem quite confused at times, he's obviously still capable in the eyes of the law, so it's a big relief knowing that he's not as bad as we thought, and that we'll have a house big enough for him to come and live with us if/when he needs to.

kingstreet

Can a solicitor conduct a test of capacity?

Genuine question, not a dig. I thought it took an ASW with Mental Health training as a minimum for something like this?

superbabe612

She said if she was concerned about his capacity then she'd have to get his GP to assess his capacity but she's obviously confident he understands enough. I was worrying unnecessarily!

holly_hobby

kingstreet wrote: »

Can a solicitor conduct a test of capacity?

Genuine question, not a dig. I thought it took an ASW with Mental Health training as a minimum for something like this?

Completely agree ...

This is such a delicate matter and a possible minefield (if contested) that I would be sure to get some independant advice on which professionals have the legal authority and capacity to perform such a diagnosis.

Always better to be safe than sorry, as I;m sure you'll agree ...

Holly