Getting a mortgage as a Discretionary Trust

mrmat

Hi

I've searched the mortgage forum for "discretionary trust", and have also looked on the really useful page on this site: "Picking and paying for the right IFA"

We (trustees) are looking to redevelop an existing building at the rear of a plot of land owned by the trust, as well as converting part of the main house (i.e. the existing building).

After speaking with developers, the work is probably going to come in at around 600k (new build plus conversion), and we have approx. 200k upfront to lend into the trust as a deposit for a mortgage to fund this.

Firstly, can a discretionary trust take out a mortgage? I'm assuming yes.

Secondly, is this the kind of thing we'd need to hire independent financial advice for, or would we be better off going around various banks and researching this ourselves?

I'm pretty good at research, but just wondered if anyone has experience of the above?

The reason we would hire IFA is if this subject is riddled with potential pitfalls. Or, of course, if doing such a thing pays for itself...

Alternatively it may be pretty simple to speak to a bunch of banks to get an idea of whether this is possible. Or online mortgage providers?

Please help!

holly_hobby

No you can't hold a mortgaged property under a trust - as the lender won't permit it, its essentially due to possessionary and potential default issues.

Unmortgaged would be the way to own under any type of trust arrangement.

Hope this helps

Holly

mrmat

Thanks Holly

What do you mean by "the lender won't permit it, it's essentially due to possessionary and potential default issues"?

Surely if a trust has sufficient assets to underwrite the mortgage (i.e. the trust in question has over £1m in assets) then anyone would agree to a mortgage?

Sorry if this is a silly question

Senior_Paper_Monitor

Should be possible for the trustees to establish a' special purpose vehicle' then invest in that (and put land into it) and then that vehicle can negotiate for commercial/development finance (not a mortgage).

This is not easy stuff and the trustees should take professional legal and financial advice (in order to protect themselves as much as anything) before taking any action.