Mortgage 23% LTV

Brock_and_Roll

Hi,

This is a really a question for those mortgage brokers that frequent this board.

I will try and keep this simple....I am administering a rather complicated probate, one part of which involves a legal settlement with a 3rd party.

The 3rd party lives in detached freehold house worth circa £330k. There is currently a £150k mortgage on it with the interest currently being paid by the Estate.

As part of the legal settlement, the 3rd party was awarded £75k in cash (paid) and the property provided the mortgage was transferred over into the 3rd party's name.

We are now informed that the exisitng lender will not play ball and that all attempts to get a mortgage elsewhere have proved fruitless. On the face of it, if the £75k cash was put down then the LTV would only be circa 23%, so very low risk.....but of course as a banker myself I know the way things are at the moment!

So I am guessing this is an affordability or age issue. The 3rd party is 56, and has only recently taken up full-time but low paid employment. The 3rd party probably only recently opened a bank account.

Can anyone think of a possible solution here? They have suggested a "private mortgage" from ourselves to which they received a short and curt response.

If there is no suitable lending product that would allow the 3rd party to stay in the house, my suggestion will be for it to be sold and for the 3rd party to move to somewhere cheaper.

Thanks in advance

DVardysShadow

Rather hasty to hand over £75k cash without ensuring that the whole deal could be followed through. A number of angles on this - including a risk that the executors could be liable for the ongoing interest. I think that the £75k should have been paid off the mortgage, leaving the estate with exposure to interest on £75k rather than £150k.

Was the settlement agreed by the estate or does it result from a prior agreement? As a legal settlement, was it court ordered, court mediated, negotiated via solicitors or negotiated directly?

Dave_Ham

At that loan to value, I cannot imagine there will not be a solution.

Depending upon the emotional motivation behind this as I have dealt with these in the past, where emotions played a bigger part than the pure financial challenges.

Other things being equal, I would be fairly confident of a solution but without knowing more detail it would be impossible to speculate further..

Good luck

paulmapp8306

DVardysShadow wrote: »

Rather hasty to hand over £75k cash without ensuring that the whole deal could be followed through.

I didnt read that the £75k had any bearing on the house. The 3rd party inherited £75k anyway, then the house separately but only IF its transferred into his name. It then looks like he needs to use the £75 as a deposit to secure the mortgage. If he could get a mortgage with say 15% deposit - he could do that and use the remaining funds how he sees fit.

holly_hobby

The LTV is largely irrelevant if the indvidual does not have sufficient income to service the loan reqd in the first place - as no proficient lender will provide an advance, knowing that it is not serviceable in the long term by the individual (re income levels and source), and they are looking at a certain repossession order. They need to demonstrate responsible lending as part of the possession process, and obv if they made an advance to an individual with in sufficient income, despite a low LTV - they are unable to demonstrate responsible lending.

Options re traditional finance are via a private investor bank or private loan arrangement (both ordinarilly requiring him to service any loan during the term) - or selling of the property if permitted under the terms of the agreement.

There is one option that is available, which may suit, at 56 he is JUST eligible for a lifetime mge arrangement. Such arrangements are not based on affordability or time bound by age, with the accumilated interest rolled up onto the advance, only repayable on the mortgagors entry into long term care or death (NB ERPs on such schemes can be costly )

They are traditionally used as an equity release vehicle, but they can also be used to pch - the % advance dependant upon the applicants age (younger they are the lower the sum), and overall LTV.

Despite his farily young age, the property value and low ltv means that I think this is a possible solution.

This is a niche area of advice, not all mge or FA's are qualified to provide advice, and as such you must source an Equity Release adviser (SOLLA - hold a register of such advisers whom by membership, have also been voluntarily audited and assessed as to their proven competency in the area).

The roll up of interest will obv erode the free equity over the term of the arrangement, and it is imperative to protect the indiviudals estate and beneficiaries that a provider who offers a no negative equity gte is sourced.

Although traditionally interest is rolled up on such arrangements, there is a provider whom allows a voluntary monthly interest repayment, either in whole or in part, allowing the mortgagor to effectively ringfence the debt (wholly or partly).

Your EQ Release adviser should be familiar with suitable lenders whom offer a suitable product with this gte, additionally Safe Home Income Plan (SHIP) - http://www.ship-ltd.org/ - are a voluntary membership lifetime mge source of lenders whom ALL provide a no neg equity gte - so you will find details of current providers meeting this mandate on their page.

Hope this is of some help

Holly

Brock_and_Roll

Thanks for your kind replies.

Just to clarify, this was a mediated agreement that led to a court order. The £75k was to be paid in cash, and the 3rd party had to use "best endeavours" to get the mortgage transferred.

The 3rd party has failed in their attempt to do this, hence we are back round the (very expensive) table!

DVardysShadow

Then I think it comes to this ....

Brock_and_Roll wrote: »

If there is no suitable lending product that would allow the 3rd party to stay in the house, my suggestion will be for it to be sold and for the 3rd party to move to somewhere cheaper.

.... unless the 3rd party sorts out their own mortgage, perhaps along the line Holly suggests. Something which bugs me a little about this is the 75k negotiated to be handed over as cash. Does this 3rd party have debt issues which might scupper any sort of mortgage?

Brock_and_Roll

Holly,

That advice is really useful - many thanks.

Brock_and_Roll

As ever with family disputes, things are complicated and this one was a cracker! The 3rd party had no cash, job or assets in their own right so the £75k can be seen in this light.

bigadaj

Brock_and_Roll wrote: »

As ever with family disputes, things are complicated and this one was a cracker! The 3rd party had no cash, job or assets in their own right so the £75k can be seen in this light.

Looks as though most of it is going to end up in the pockets of advisers, lawyers and bankers then.