Inherited property: will mortgage providers frown on buying out sibling not in will?

IFTB

Hello kind strangers,

Long story short, I've inherited my mum's house as sole beneficiary because I'm the only one she trusted with it for a number of reasons, a main one being I'd be responsible enough to either keep or sell it and ensure my brother got a cut.

My brother isn't in the will but I want to keep the house and get a mortgage to pay him half of its market value, which was the understanding I had with mum.

Will mortgage providers frown on such an arrangement?

I have a mortgage adviser who says most of the providers won't touch such an arrangement, but surely if I explain the reasons it'll make sense? Just because he isn't in the will, what's dodgy about giving him some inheritance?

If anyone has any insight, that'd be great.

Cornucopia

If I've understood correctly, this sounds perfectly doable. I'm not sure why your adviser says otherwise.

You have a property which you own outright and you wish to take a mortgage on it, to "raise cash". Would this be a residential mortgage so you can live there, or a BTL mortgage, so you can let it out?

Obviously your brother cannot live there under either of the above scenarios - is that the issue?

rebeccatom

Was the house owned outright by your mother? If you are now the owner and there is no outstanding finance on it, I don't see why a lender would not want to lend at 50% LTV (obviously assuming you have the income to show affordablity of the mortgage)

IFTB

Thank you for your responses. I thought it was strange, too.

There is a debt on the property for 20% LTV, so I would seek a 60% LTV mortgage to give him half of the value minus half of the debt.

Yes it would be a residential mortgage. I want my girlfriend to move in with me so we can make it our future family home.

The mortgage adviser has actually advised me to not put it in my name yet because that will complicate matters. At present it is still in my mum's name and I am managing it as executor.

Cornucopia

Sounds like the debt is the issue.

I think you need to take specialist advice on this. It may be that the terms of the debt mean that the property must be sold to repay it first (that seems quite likely).

ognum

IFTB wrote: »

Hello kind strangers,

Long story short, I've inherited my mum's house as sole beneficiary because I'm the only one she trusted with it for a number of reasons, a main one being I'd be responsible enough to either keep or sell it and ensure my brother got a cut.

My brother isn't in the will but I want to keep the house and get a mortgage to pay him half of its market value, which was the understanding I had with mum.

Will mortgage providers frown on such an arrangement?

I have a mortgage adviser who says most of the providers won't touch such an arrangement, but surely if I explain the reasons it'll make sense? Just because he isn't in the will, what's dodgy about giving him some inheritance?

If anyone has any insight, that'd be great.

Just a thought and I am not an expert, have you completed probate? In order to complete you mothers affairs you need to settle her debts while there is a loan outstanding on the property you cannot do this.

Is it possible for you to pay off the mortgage from your mothers other assets and settle her estate. The house would then become fully yours when the estate is settled. ou could then remortgage your house to your name.

I think the problem comes in trying to take money from the house while your mother still has a mortgage on it and it is not your house so you would be mortgaging an asset of the estate. Try to think of a way of paying back the debt and settling the estate.

getmore4less

Might be easier buying the house off the estate.

Then decide if you want/need a DOV or just gift brother.
(potentially avoiding IHT issues for your estate).

Then you need to decide how to own it if the OH is moving in.

getmore4less

If you pay of the debt and assent the house you could hit the 6month issue restricting options.

G_M

I'm unclear. Is there an exisiting mortgage on the property in your mum's name? If so, this will need paying off and a new mortgage taken out in your name.

If not, I see no reason you cannot take out a mortgage yourself anyway, provided of course you qualify in the normal way (income, credit history etc).

Whether you then use the cash from the mortgage to build an extension, go on a world cruise, or give to your brother is up to you.

kingstreet

getmore4less wrote: »

Might be easier buying the house off the estate.

Then decide if you want/need a DOV or just gift brother.
(potentially avoiding IHT issues for your estate).

Then you need to decide how to own it if the OH is moving in.

That's the way I'd do it.

Avoid the six month rule.

Estate gets the money to repay the existing mortgage or whatever is secured on it and estate can pay cash to the other "recipient" or beneficiary if the deed of variation is actually needed.

Old_Git

was there any life insurance to clear the debt