Mortgage to Repay Parent's Equity Release Debt Upon Death

A_Myers70

Hi all, apologies if in the wrong place, but I am struggling to find any guidance on this question. I've spoken to 2 mortgage advisors today, who gave conflicting advice and it's left me pondering. I will try and give as much relevant info as possible

My parents have recently passed away and left their home to myself and my 2 brothers. The property has an equity release charge against it. The equity release company when asking how we intend to repay the debit, said it is possible for us to refinance the debt and take a mortgage out to repay the equity release debt.

The 3 of us are happy to club together to get a mortgage and thankfully are in a position to do so. We arranged to speak to a couple of local independent mortgage advisors today. The 2 advisors gave conflicting advice. One said that we can not do this as the property isn't ours and we can not take a mortgage out against something that isn't ours. Even after probate is granted

The other just said our parents shouldn't of taken out the equity release as it's left us with a headache and we should see if it's possible to repay the debt by liquidating other assets in the estate or using our own savings. 

I am trying to arrange a meeting with another advisor, but for my own thoughts. Is it possible to get a mortgage in such circumstances?

user1977

Surely you're just buying it from the estate, at a price which equates to the current balance of the equity release mortgage? I wouldn't have thought that to be difficult in principle. Don't know what the first adviser was thinking - obviously it's pretty normal to be applying for a mortgage for a property which you don't yet own!

MWT

Very strange advice indeed... It is hardly unusual to find a mortgage on a house that is left to children in a will...

How much is the house estimated to be worth and how much is required to clear the equity release at the moment?

Do any of you plan to occupy the house as your main residence?

A_Myers70

Thanks for the replies. The house is worth £750,000 and the debt is £250,000. I assumed as I was on the call earlier the advice was duff or he misunderstood us.

1 of my brothers has shown an interest of potential living in it, which we are fine with, we have also discussed btl too. We are trying to find out all options before making a decision. 

user1977

A_Myers70 said:

1 of my brothers has shown an interest of potential living in it, which we are fine with, we have also discussed btl too. We are trying to find out all options before making a decision. 

So how are you going to regulate that among the three of you, and what sort of mortgage are you intending to apply for? Lenders prefer to know that they're dealing either with owner-occupiers or landlords, not a mixture of the two.

A_Myers70

After confirming with both the lender and a financial advisor it was possible, Unfortunately, it seems it has all gone out the window. One brother has decided that he doesn't want to allow us to buy from the estate, unless we are paying market value and not the value of the equity release, and has decided to place it on the open market. 

GrumpyDil

OK.

So guessing that brother wants to release his share of the money then. 

TBH my view is that's the simplest and most straightforward outcome and removes any complications around future CGT etc. 

MWT

A_Myers70 said:

One brother has decided that he doesn't want to allow us to buy from the estate, unless we are paying market value and not the value of the equity release, and has decided to place it on the open market. 

You always were buying at market value it was just that the 3 of you together were already entitled to £500k of the value.

To keep that principle, without one brother the other 2 of you would need to raise a mortgage of £417k, which would clear the mortgage and leave the non-participating brother's share in the estate to be distributed to him.

Raising that much between 2 of you may be less practical though... 

Unfortunately these plans often fall through because one or more beneficiaries want the cash not a share in a property and a mortgage commitment...

A_Myers70

Thanks for the replies. 

Once he saw how much he potentially could receive he decided to cash out as it were

It is his decision and we respect that and as suggested we are fortunately still able to proceed with mortgaging to pay the equity release and pay him his share 

MWT

Glad to hear there is a way forward for all of you to get what you wish given the circumstances.