Mortgage on a partly owned inherited property

connor0811

To cut a long story short, we lost a family member at Easter 2020. Probate has gone through recently and there is a property involved (no outstanding mortgage) and I’m one of 4 people who has been left it in the will. It’s split 50/50 between two households, then split again if there’s any children (I’m on of the children!). So how it’s worked is the other household, the single beneficiary has no children so they hold 50%, our household it is 25% to my mother, then me and my sibling 12.5% each. 

Now for the long part...

I’m the only person who either wants the property or is in a position to potentially purchase the property. It has been valued by 3 different estate agents and the valuations range from £85,000-£95,000, all of the other beneficiaries are pretty keen to keep the property in the family and are all in agreement (they told me this I didn’t prompt it) I can have it for £85,000. 

I’ve worked it out that as I already own 12.5%, I would need a mortgage of £74,375. I’ve had problems finding anything like this, they just seem to work off the total value of the house and don’t take into account that you may already own a percentage. I’ve heard a few ways I could over come this, such as just remortgaging in my name and paying the other beneficiaries out of this, but would like pointing in the right direction by people a little bit more knowledgeable. I know people will say phone a mortgage advisor or my bank but I fear, probably quite stupidly, they might cotton on I don’t have a clue and will be rubbing their hands together.
  

On an additional note I do have a Help to Buy ISA that doesn’t have enough to cover a full deposit but have a current account that does have enough in if it was a 10% deposit ( I don’t know if I could use the Help to Buy + bonus, then top up with money from the current account). I’m in full time employment with a local authority. 

davidmcn

connor0811 said:

I’ve worked it out that as I already own 12.5%, I would need a mortgage of £74,375.

But you later say you've got cash to go towards a deposit, so you don't need to borrow the full amount you're paying to the other beneficiaries? Can you explain at which point you're hitting problems?

Thrugelmir

You don't own 12.5%. The estate owns the property. 

K_S

@connor0811 Siblings inheriting a mortgage-free property and then one of the siblings buying the other one out through taking out a mortgage on the property isn't an uncommon scenario. Depending on the specifics of where the process is at currently, your equity in the property may be considered towards the deposit, though how much of a deposit you need will depend on whether you intend to have the property as your residence or let it out. And also your personal circumstances (income, debt, credit history, etc etc). Are you planning to live in the property or let it out?

If you intend to let it out, you will normally need a 25% deposit. If you intend to live in it, while there are 90% LTV mortgages in the market, it's a very limited pool of lenders. At 85%, you have a much wider choice of lenders.

It isn't clear from your post - is the probate completed and the inheritors' names on the title (in which case it is usually a remortgage)? Or has title not been transferred (usually treated as a purchase then).

connor0811

K_S said:

@connor0811 Siblings inheriting a mortgage-free property and then one of the siblings buying the other one out through taking out a mortgage on the property isn't an uncommon scenario. Depending on the specifics of where the process is at currently, your equity in the property may be considered towards the deposit, though how much of a deposit you need will depend on whether you intend to have the property as your residence or let it out. And also your personal circumstances (income, debt, credit history, etc etc). Are you planning to live in the property or let it out?

If you intend to let it out, you will normally need a 25% deposit. If you intend to live in it, while there are 90% LTV mortgages in the market, it's a very limited pool of lenders. At 85%, you have a much wider choice of lenders.

It isn't clear from your post - is the probate completed and the inheritors' names on the title (in which case it is usually a remortgage)? Or has title not been transferred (usually treated as a purchase then).

I would be wanting to live in the property.
Yes probate has gone through, sorry I thought I put this in my original post! 

And I’m not sure about the names on the title, is that standard one probate is complete? I can soon find out though I’ll ask my relative who’s got all the paperwork.

Thank you for the reply 

connor0811

Thrugelmir said:

You don't own 12.5%. The estate owns the property. 

Even though probate has gone through?

theoretica

If title has been transferred and all four of you are named on the deeds already then that might complicate using the ISA - and if you don't use the ISA for this you will no longer be a first time buyer which will limit what you can do with that money.  But it is common for the deposit to be made up from different places - ISA, your 12.5% of the estate and as much savings as you choose to use.

connor0811

davidmcn said:

connor0811 said:

I’ve worked it out that as I already own 12.5%, I would need a mortgage of £74,375.

But you later say you've got cash to go towards a deposit, so you don't need to borrow the full amount you're paying to the other beneficiaries? Can you explain at which point you're hitting problems?

Yes, sorry my mistake I was using the word mortgage for the money borrowed plus the deposit. The problems are the equity, everywhere seems to just want to know the full value of the property and go from there when I go to apply, so I don’t know if I’d just need to borrow the full amount (minus deposit) then get the 12.5% back, the 12.5% could be taken into account as part of a deposit, the 12.5% needs taking off the price of the property when I apply (but they ask for the value, nothing mentioned about minus equity) or just remortgage in my name and pay other beneficiaries out of that. I’m new to all this sorry for not being clearer.

getmore4less

Buy off the estate with your share and any other funds as your deposit.

Fairly standard transaction. 

K_S

connor0811 said:

K_S said:

@connor0811 Siblings inheriting a mortgage-free property and then one of the siblings buying the other one out through taking out a mortgage on the property isn't an uncommon scenario. Depending on the specifics of where the process is at currently, your equity in the property may be considered towards the deposit, though how much of a deposit you need will depend on whether you intend to have the property as your residence or let it out. And also your personal circumstances (income, debt, credit history, etc etc). Are you planning to live in the property or let it out?

If you intend to let it out, you will normally need a 25% deposit. If you intend to live in it, while there are 90% LTV mortgages in the market, it's a very limited pool of lenders. At 85%, you have a much wider choice of lenders.

It isn't clear from your post - is the probate completed and the inheritors' names on the title (in which case it is usually a remortgage)? Or has title not been transferred (usually treated as a purchase then).

I would be wanting to live in the property.
Yes probate has gone through, sorry I thought I put this in my original post! 

And I’m not sure about the names on the title, is that standard one probate is complete? I can soon find out though I’ll ask my relative who’s got all the paperwork.

Thank you for the reply 

@connor0811 If probate has completed, then your and your fellow inheritors will likely be named on the title register so you already own part of the property and *may* have lost your FTB status (don't quote me on this, I'm not entirely sure what the rules are given that your share is only worth around £10k).

In this scenario you are effectively looking to remortgage the property to buy out the others' shares. Your "deposit" will consist of the equity plus any cash that you wish to add. So when you talk to a broker/lender you are looking to borrow 85k less your deposit (equity+any cash). Some lenders will not do this until 6 months have passed but others will waive that requirement in inheritance cases.

anniecave

You need to work though all the numbers.

How much do you actually have that you can use as a deposit? Have you set aside any fees you will need to pay (including mortgage arrangement fees, solicitors fees, valuation fees etc)? If not, you need to subtract these fees amounts off your deposit (unless you are adding any of them to the mortgage amount) to get a final deposit.

If you've agreed that the property value is £85,000 then this is the value for mortgage purposes.

Now the other number you need to work out is then the amount you actually need to borrow as a mortgage. You need to start with the 87.5% figure (as this will need to be paid to the estate or the other current co-owners), but if you have money towards a deposit then you need to subtract this as would also then form part of this 87.5% essentially. So the balancing figure of 87.5% minus the amount you've got for a deposit will be the actual amount you need to borrow.  Does that help?