Declaration of trust and divorce

V2001

Hi I'm asking the following for a freind, so it's just good advice I'm after.
Freind is getting divorced and he wants to buy his ex wife out. He can't afford to buy her out , so his mother will buy her share out and will be moving in with my freind in her old age.
They should then own the house as tenants in common. House is worth 650k. They have 200k mortgage. His mother will pay 225k to buy his ex wife out. Freind will continue paying all mortgage costs.
How do they structure it so that if freind pays the 200k remaining mortgage of after a certain period of time he should own a bigger percentage. Does this need to be recorded in declaration of trust? How so? He wants to also bear in mind his mothers IHT liability, he does t want her paying more if he's paid of the majority of mortgage.  I suggested they could even share mortgage as she has enough money.

TBagpuss

HE will have a number of factors to deal with.

One is that his wife is likely to want to be released from the mortgage, so he will need to be able to borrow enough in his sole name to get a £200,000 and clear the existing one. If the house is going to be in his and his mum's joint names then the lender may well want her to be on the mortgage as well, and if the house and mortgage are in has sole name, then his mother would need some security for her investment. They are both going to need specialist advice.

In terms of the declaration of trust, they can do it so that it states mother has 34.6% of the house (225/650) and that it expressly states that her interest is of the gross value of the property and that son is solely liable for, and will indemnify her in relation to, the mortgage.

Another possibility might be for mum to lend him the 225K and have a second charge over the property securing her repayment of 34.6% of it's value, with specific provisions setting out the circmstances in which she will be entitled to be repaid.

V2001

Thanks. Say that mother buys his wife out and goes on the mortgage which she can easily afford to do. Do mother and son both need to have a joint account which the mortgage goes out from, or can the mortgage be taken from both their sole accounts by the bank individually?
This way they could own a equal 50/50 share 

tacticalbanjo

I don't think the bank will care about which account the payment comes from as long as they get paid - my parents have never had joint account but had a mortgage together, the payments just came out of my dad's account. I doubt that you'll be able to persuade the bank to take two payments.

princeofpounds

V2001 said:

Thanks. Say that mother buys his wife out and goes on the mortgage which she can easily afford to do. Do mother and son both need to have a joint account which the mortgage goes out from, or can the mortgage be taken from both their sole accounts by the bank individually?
This way they could own a equal 50/50 share 

A single nominated account. 

The terms of which banks might lend to your friend and his mother could be affected by her age.

V2001

Cool. We was just thinking of IHT. If it comes out of the sons account the mother will have to pay half the mortgage monthly into her sons account. Else later on hmrc may question what the monthly payments are for  ..

princeofpounds

V2001 said:

Cool. We was just thinking of IHT. If it comes out of the sons account the mother will have to pay half the mortgage monthly into her sons account. Else later on hmrc may question what the monthly payments are for  ..

I doubt HMRC would have a problem as long as you keep records of the mortgage. But if that concerns you, then pay from the mother's account, or a joint account.

Thrugelmir

Depending on the age of the mother. The new mortgage maybe the greatest challenge.