Inherited A Property but...

steveeo

My wife is about to inherit a house from her granddad who has passed away.
He left a will asking for the house to be left to her and everything else shared with other family members.
He has a small mortgage on the house, about £1300 is all that is outstanding
plus other none secure loans, credit cards ect and the total debt is about £16,000

We live in a council house at the moment but want to buy the house on the "right to buy" we will get about 45% discount on it.

What we want to do is mortgage the house which she has been left to pay of the debts her granddad owes plus buy our council house on the "right to buy" and rent the council one out and live in her granddad one

All the above only comes to about 40% of the value of the house she is inherited

The question is, how do we go about this? What’s the best way, can we even do this or is there a better way?

We have poor credit history for a start and both of us work

Thanks
Ste

ILW

Hope your going to do the right thing and rent out at what you are currently paying.

Think RTB bars you from renting out for about 5 years.

monty-doggy

Firstly you need to check if there are any protection policies in place that would clear his debts in the event of his death, this is very common.

Secondly this may mean that your inherited property is mortgage free, and then you would need to see about re mortgaging it to release some equity, or simply moving into it, and trying to get a single mortgage on your current property under the right to buy, bu ensuring it was a BTL mortgage.

Depending on your credit history and how bad it is you am not be able to get a mortgage.

I would see an independent advisor to assess your finances.

Also check very carefully the right to buy Ts and Cs because there are very often penalties if you sell or rent it out.

holly_hobby

Firstly, all outstanding debts Grandad owes must be settled from the estate by the executor, BEFORE the estate may be distributed under the terms of the will.

The £1300 mge in grandads name, must be repaid before legal ownership can be assumed by your parnter, and they be in a position to refinance to release equity.

To which the existing lender may consider transferring of the mge under such a circumstance (as Halifax do or at least did), but of course your partner must meet their status/affordability criteria for this to play.


Some lenders also require 6 mths ownership before any equity release, but this is usually wavied in cases of inheritance.

If the monies aren't in the estate, or can't be raised to repay the os mge - the property will obviously have to be sold to meet this requirement.

So thats the refinancing dealt with.

My main issue, is the fact that you want to use the remortgage of grandads property, to purchase your current home under the RTB scheme, not however for your own residence (RTB being the chance for those whom would not ordinarily be able to own their own home, the chance to do so), but instead solely as a business opportunity to pch and rent it out for profit. (whilst you make grandads your primary residence)

This effective sub-letting may not only possibly be in breach of any agreed RTB pch agreement and terms - but essentially is an abuse of the system and really a tad shabby from my moral view point. as its taken social housing letting stock and essentially turning it into private letting stock, which isn't the driving purpose of the scheme (sorry if that offends x) .

Hope this helps

Holly

ACG

I think its been covered off but with RTB your not usually allowed to rent the property out for a set period. Also selling the property with a set period (10 years off memory) then you would have to pay back a percentage of the discount.

Im also not entirely sure if you can purchase a RTB if you own another property - something worth just double checking.

steveeo

Just been reading though a few other threads on here and we are starting to understand this now, even if we forget our home now, with the house she inherits we will still need something to pay the debts, my wife wants to live there because this was what her granddad wanted.

The easy thing to do would be sell the house, pay of his debts, buy our RTB and have money in the bank but we don't want to do this.

Thanks to everyone that's have left information for us I will keep this updated so it will help the next person

ACG

Get a mortgage pay off the debts and get rid of the RTB house?

monty-doggy

As said above, if there isn't anything in place to clear the debts, they may sell the house in order to pay the debts as no distribution can be made before debts are paid. You need to speak to the executor ASAP. You may lose the chance to get it all sorted otherwise.

steveeo

ACG wrote: »

Get a mortgage pay off the debts and get rid of the RTB house?

That isn't as simple as it sounds because of the debts but that's what we are now looking to do, we have a meeting with the mortgage company that her granddad has his with so we will know what they can do for us

steveeo

monty-doggy wrote: »

As said above, if there isn't anything in place to clear the debts, they may sell the house in order to pay the debts as no distribution can be made before debts are paid. You need to speak to the executor ASAP. You may lose the chance to get it all sorted otherwise.

This is why we are asking for advice, we will meet with the current mortgage company and see what they can do, we are working fast and have been in contact with all the debts and we have about 8 weeks so all accounts are frozen also we are waiting to see about his life insurance to see what is covered.

Thanks for the advice

antrobus

ILW wrote: »

...Think RTB bars you from renting out for about 5 years.

I know that if you acquire a property under RTB, that you have to repay some or all of the discount if you sell within 5 years, and that you have to give the council first refusal if you sell within 10 years, but I can't see anywhere where it places any restrictions on renting the property. In fact I found a document issued by Southwark Council that stated "If your property was originally sold under the Right to Buy, you can rent it out without needing to ask for the council’s permission".

ACG wrote: »

...Im also not entirely sure if you can purchase a RTB if you own another property - something worth just double checking.

The RTB seems to apply if it's "your only or main home". So long as it is your main home at the point of exercise, I'm not so sure it matters that you own another property, or that you intend to move elsewhere at a later date.