Equity Release Stumbling Block

warmsocks

Looking for some guidance regarding an equity release lifetime mortgage offer which has been received from the lender, however the lender’s solicitor is holding up the release due to a technicality.

Myself and my wife have moved in with my mum to care for her, on her property she has an old barn that we wish to convert in order to stay there, look after her but also keep a little distance. We mentioned this when the equity release was requested and that some of the funds would be used for this. The mortgage company solicitors are now asking us to split the title before releasing the equity. We don’t want to do this as we want to sell up as a whole when my mum either passes or goes into care. Does anybody know why this seems to be a stumbling block and what we can do to get around it? From my research if we call the building an annexe it makes a difference, so we have tried to do this and so far crickets from the solicitor.

Any help/advice much appreciated in advance, thank you.

warmsocks

I should add that my mum’s funds are pretty much zero now so there is some urgency in getting this resolved.

MWT

Generally they want a simple clear title to a single dwelling which can be easily sold.

They do not want to be involved in planning permission, major development/conversions etc.

Anything which threatens that simplicity will be a red flag for them.

Just as well that this has come out now as after the equity release your Mother would have had to request permission for the work to take place, and that could easily have been denied...

AnotherJoe

Do you (your mum) have planning permission for this conversion? 

That would be the first step. 

Assuming it all got converted as you want, but with two separate titles, there's no reason you can't sell it as one when you do sell up. 

You are probably looking at at least a years worth of work and time to get this done. And maybe, with current delays at least 6 months to get plans drawn up and the title split. (Based on people I know going through pp right now and LR delays)
I would suspect you can't just "call" the building an annexe there must be some specific requirements / conditions. In any case if it's not livable at the moment that seems moot. 

warmsocks

Thank you for the replies above.

We already gained planning permission for the conversion so there is no issue there. I believe the issue with the solicitor is that we plan to stay on in the conversion after my mum passes/moves into care, that is the only thing that makes any sense to what they are doing. We don’t, we can’t sell up and move fast enough to be honest, surely splitting the title makes it look even more like we would want to stay and could potentially make it harder to sell the main house in their eyes with us living in such close proximity. Could there not be a waiver or something we could sign to save splitting the title to say we would sell all the property in order to pay back the equity?

We don’t want to have to do anything else in order to progress this as we don’t have the funds available without the equity release, it’s a classic catch 22 situation.

As you can probably tell this is a whole new frustrating world for me.

MWT

You will have to sign waivers of your residency rights anyway, I'd be surprised if that has not already been asked for...

The problem is that you are still going to need their approval to carry out the conversion of the barn after the equity is released, and you are getting a solid signal that their answer will be 'no'.

You may also find that if you try to split the title after the release they will also say 'no' or require a percentage of the funds released to be repaid to allow it to happen.

Will you be providing the money for the conversion of the barn, or is that intended to come from the funds your mother is releasing?

warmsocks

They were aware of the proposed conversion at the outset and also aware that some of the equity released would be going towards that. This is what is so frustrating, they knew all this at the start, they still sent us the offer and now it is their solicitor holding things up.

In my over simplified mind, we would be adding value to the property they would have a stake in, we have already signed waivers for the property as a whole, I just don’t see the solicitor’s issue.

[Deleted User]

If you take away Equity Release and try to buy 2 properties on a single title you will come up against the same objections from normal mortgage companies. A few smaller building societies consider it and its becoming ok for specialist but on the whole the mainstream market will refuse to lend.    

For high street lenders one reason is because they worry they will end up with 1 residential property and 1 property that is later rented out. This creates a messy combination of residential (regulated) mortgages and rented (non regulated) mortgages. 

Essentially it means that if you kept it on 1 title and converted the barn in to a 2nd property they will find it really hard to sell it in the future if they needed to. Most buyers would come up against declined mortgage applications.   
Lenders of all types make lending decision partly on how hard it is to sell.   

What is your objection to splitting the title? If its just the hassle of it then you understand you are asking someone else to take the same hassle in the future.  Since they are the ones with the money you want then there is no reason for them to end up with an asset that is harder to offload in the future.  

MWT

warmsocks said:

In my over simplified mind, we would be adding value to the property they would have a stake in, we have already signed waivers for the property as a whole, I just don’t see the solicitor’s issue.

As Deleted_User has said, and as I mentioned earlier, you are adding complexity to the deal and they have a limited tolerance for anything complex.

If the only thing between your mother and the equity release she wishes to achieve is splitting the title then it seems like that is the way to go.

If you tell them your plans have changed and you no longer intend to convert the barn just to get the deal done, you are going to be right back at the same stumbling block if you try to do it later as you will need their permission to make any changes that require planning consent even if you already have it.

... and consider it fortunate that the barn work had not already been done as your mother could well have found that her property would not meet their standards for suitability at all...