Releasing Equity from Inherited House?

westv

This is more of a general query as, at the moment, there are no specific plans
Recently inherited house from parents.
3 brothers have each been given an equal share in the will
1 brother 48 - not employed. Receives benefits. Lives in inherited property
2 brother 58 - employed and has a regular income - owns own home with mortgage
3 brother 60 - employed and has a regular income - owns own home with mortgage
Is there anyway that one (or all) brothers can release equity from the property without selling? The brother living at the property is under 55 so that excludes equity release and has no employed income so (I assume) that excludes a mortgage. 

MWT

Given the relative ages of all concerned, and the fact that the one living there cannot buy out the other two, any 'release' of capital would involve a new mortgage guaranteed by the other two brothers which assumes that their current mortgage commitments and earnings would even make that possible and that they are willing to take on the repayment obligations...

The logical suggestion would be to sell the house and the brother living there would need to use his 1/3 of the proceeds to purchase a smaller property,.

If the value of that 1/3 was not sufficient to purchase anything suitable perhaps the other two could agree to part fund the purchase so the new smaller property was jointly owned?

westv

Thanks. That was my thinking too. 
Whilst selling is the most logical answer we don't want to go down that road unless we are all agreed.
We might have to wait until brother 1 is 55 and see what options are available then.

MWT

westv said:

We might have to wait until brother 1 is 55 and see what options are available then.

If you are still thinking about a 'Lifetime Mortgage' then you still have some problems ahead of you...

At 55 the maximum you could release would be around 25% which still isn't enough to give the other two brothers their share but now you've shut the door on most other routes out of the problem with a relatively high interest rate and increasingly large loan that often comes with significant early repayment fees...

You'll have to look into this further and taking advice is a requirement, but you'd almost certainly have to take the mortgage in the sole name of #1 with the consent of #2 & #3 as they are not resident.

Given the relative ages, #2 & #3 are most probably effectively giving up the remaining value in the legacy for their lifetime and greatly reducing the residual amount that would eventually pass down to the beneficiaries of their estate, all in exchange for each of those two receiving 12.5% 'now'  out of the 33% they were entitled to...

That still leaves #1 with an obligation to maintain the property and pay for all running costs etc and none of the cash from the release, unless #2 & #3 reduced the amount they take even further...

Even if you can get through the advice stage and get a lender to accept the arrangement, this doesn't feel like a sensible plan... 

Thrugelmir

Is downsizing a possibility with a cash purchase. The other two brothers retaining an interest in the new property to cover any monies owed. 

westv

Thrugelmir said:

Is downsizing a possibility with a cash purchase. The other two brothers retaining an interest in the new property to cover any monies owed. 

It's looking like the only realistic option is a downsize. Whether the remaining two hold a stake in the new property remains to be seen. Whatever, it seems unlikely they will ever realise the full share of their stake.

Just to add there will be no other beneficiaries apart from spouses - no children.

getmore4less

Was the brother living in the property given any right to do so in the will?

westv

getmore4less said:

Was the brother living in the property given any right to do so in the will?

Just a share of the property but we don't want things to turn ugly.

MovingForwards

Sell the property, younger brother buys a different one with his share of the money and two other brothers lend him the extra by way of a mortgage secured on the property. Acts the same was a normal mortgage only you two agree the terms upon which it will be repaid eg on death or downsizing. Two other brothers make reference to the outstanding money in their wills and say where it's to go after YB sells / passes away, just in case he outlives the other two.

Also saves second home stamp duty and CGT.

Younger brothers inheritance can potentially be disregarded for 6 months as he's using the money to buy a new home; ask on the benefits section for further information about this and also specify what benefits he receives.

If younger brother is unlikely to work due to health then a 1 or 2 bed ground floor flat may be more than suitable, he doesn't need a like for like property or in the same area, especially if property is expensive.

westv

MWT said:

westv said:

We might have to wait until brother 1 is 55 and see what options are available then.

Given the relative ages, #2 & #3 are most probably effectively giving up the remaining value in the legacy for their lifetime and greatly reducing the residual amount that would eventually pass down to the beneficiaries of their estate, all in exchange for each of those two receiving 12.5% 'now'  out of the 33% they were entitled to...

In reality it will never be 100% of what the will indicated though as brother 1 has to live somewhere and that incurs a cost.

MWT

westv said:

MWT said:

westv said:

We might have to wait until brother 1 is 55 and see what options are available then.

Given the relative ages, #2 & #3 are most probably effectively giving up the remaining value in the legacy for their lifetime and greatly reducing the residual amount that would eventually pass down to the beneficiaries of their estate, all in exchange for each of those two receiving 12.5% 'now'  out of the 33% they were entitled to...

In reality it will never be 100% of what the will indicated though as brother 1 has to live somewhere and that incurs a cost.

True, but a lot depends on just how much 1/3 of the value of the current house will get him, keeping in mind it probably doesn't have to be in the exact area of the current house if that helps reduce costs...

... and keeping the current house isn't cost free, especially if it involves heating and maintaining a much larger property than necessary...