House sharing with in-laws

spuds37

My wife, myself and her parents bought a property for 320K and extended it costing 130K.
We have split purchase and extension costs 50/50 My wife, myself have a mortgage of about 185k and got a good deal with the LTV Her parents sold their old house and gifted us the cash, moving in after extension.

Two years later my wife’s parents are talking about getting a legal document like a declaration of trust.
Our concern is next time we look at remortgaging we will not get a good rate. Or may even find it hard to get a mortgage with others having a claim to the house. Any thought?

antrobus

Whose names are recorded on the Land Registry as the legal owners?

spuds37

At the moment just myself and my wife

hcb42

it's fair enough that they want to protect themselves.

Who is on current mortgage?

Edit: if the LTV was reduced, it wouldn't be any worse a position than you would have been in if they had not gone in with you on the purchase

antrobus

spuds37 wrote: »

At the moment just myself and my wife

So, basically you and your wife purchased the property essentially using a "mortgage of about 185k" and cash "gifted" by your parents-in-law. But they've now changed their minds, and now want their 50% share of the house?

spuds37

Hi hcb42, just myself and my wife
We are under the impression that getting a mortgage with others with a claim, especially as they are retired would make it difficult to get future mortgages and put the rates up.
We want to make sure a declaration of trust is the correct route for both parties

spuds37

Hi Antrobus
Basically yes, but not to take the money just to put on writing it is their money

antrobus

spuds37 wrote: »

Hi Antrobus
Basically yes, but not to take the money just to put on writing it is their money

It would be worthwhile to have a chat with the Ps to find out why it is that they now want it put in writing that it is 'their money'. What are they worried about?

I'd also tread a bit carefully, because when you applied for that £185k mortgage, you no doubt told the lender that the rest of the money was yours as well, that's how you got that low LTV and a good deal. The lender might be very upset if they found out that the money isn't yours but someone else's, and that you'd got that good deal under false pretences. Somebody might mention the word fraud. It's just a warning, you understand. I'm not casting any aspersions.

holly_hobby

It depends what they want to protect it from.

As it stands, if the property was the subject of a bankruptcy, possession or charging order, your parents in law could do little about it - as already stated their cash injection would have been declared as being a gift, thereby removing any beneficial ownership claim they may seek to lodge - so I can see why they would be concerned.

If its that they want to prevent you selling without their agreement - - I can see their point.

However, the fact they signed a declaration for the lender stating their injection was a gift - means that they have no legal or beneficial rights to the capital.

They/you could certainly effect a deed of trust, but this will only be effective when the property is sold by you - it won't prevent any financial institution in seeking any possession/charging order/bankruptcy order.

What arrangements are in place if they pre-decease you ? Do they want their investment to go to other parties ?

What arrangements (financial and will) are in place, re the property, and if you both pre-decease parents ?

Protecting their investment .....

Well they could apply for a 2nd charge - which means that if you sell, they get their monies (after the mge lender) - but the lenders agreement is required for this to be effected .... and it may cause the lender to have a dig re the original deposit arrangement.

They could effect a trust deed, which means that if you sell the terms are invoked.

Another way could be to remortgage onto a joint mge (all 4 of you - although typically only upto 3 incomes can be used in affordability assessment), which will give you all beneficial and legal ownership.

However, this is an issue with lots of lenders because most have a max redemption age of 75 yrs (which is based on the oldest applicant), and in the case of older applicants obviously can restrict the mge term somewhat.

There are however a couple of lenders whom don't have this upper age limit, but of course affordabilty must be demonstrated throughout the term - which I am assuming will be there. Could this be an answer (albeit there may be associated fees) ?

I am assuming the exercise was not to avoid care home fees/iht etc.

Hope this helps

Holly x