Life Interest Trust

djbaum

I have been left a Life Interest in a property by a relative on her death, meaning I can live in the property rent-free until I die. I can also transfer this life interest into another property although if it is a higher value property, I have to pay the difference.
I am now looking to buy a property of a higher value but struggling to find a lender who is willing to lend-I'm now on my fourth broker! The Life Interest Trust will consent to a first charge on the property and the LTV will be <40% so I'm struggling to understand what the problem is.
I'd be really keen to hear from anyone who has been in a similar position or knows how to handle this

K_S

@djbaum I'll be honest, I've never come across anything similar outside HNI mortgages. What are the numbers you are looking at - property value and loan size?

Tbh, if you have been through 4 experienced brokers who have the time to research it and talk to lenders, and none of them could find a suitable lender, it might well be a dead end.

getmore4less

One issue might be the legal owners will need to do more than just allow a first charge.

As a life tenant you don't have any legal title as the borrower  so they will need those that do to accept as trustees.

From what's been said here previously only HSBC consider that arrangement of sole borrower no proprietor with the proprietors giving up their rights to allow repossession on non payment of the debt.


Then there may be an issue that the trustees may be exceeding their powers all owing the life tenant to create a debt liability on the trust.

djbaum

K_S said:

@djbaum I'll be honest, I've never come across anything similar outside HNI mortgages. What are the numbers you are looking at - property value and loan size?

Tbh, if you have been through 4 experienced brokers who have the time to research it and talk to lenders, and none of them could find a suitable lender, it might well be a dead end.

"my" property is valued at £220k, the one I want to buy is valued at £320k, so looking for £100k difference

kingstreet

Have you asked a conveyancer what the UKF Handbook says about this? Your conveyancer is going to have to certify clean and unencumbered title to your lender and may be unable to do so in such circumstances.

getmore4less

Are you trying to structure this where you buy the property with a mortgage and a loan from the trust(once the trust property is sold) with that trust taking a second charge?

MWT

I've never heard of a Life Interest Trust allowing the Life Tenant to buy a bigger house encumbering the assets belonging to the trust...

I do understand the mechanism for down-sizing as that of course still leaves the Trust in 100% possession of the new property.

Has anyone even heard of this sort of 'trading up' being allowed?

getmore4less

Having joint(TIC) ownership  is very common where part of the property is held by the trust.

Even with existing mortgages taken over by a survivor part owner.


A new mortgage is a different issue to become joint owner if you were not one in the first place.

djbaum

getmore4less said:

Are you trying to structure this where you buy the property with a mortgage and a loan from the trust(once the trust property is sold) with that trust taking a second charge?

No, the trust will own two thirds and I will own a third by way of a mortgage but the trust will consent to my mortgage lender having a first charge

djbaum

MWT said:

I've never heard of a Life Interest Trust allowing the Life Tenant to buy a bigger house encumbering the assets belonging to the trust...

I do understand the mechanism for down-sizing as that of course still leaves the Trust in 100% possession of the new property.

Has anyone even heard of this sort of 'trading up' being allowed?

I'm not looking to encumber assets owned by the trust. The Trust value is currently c.£200k and I'm looking to transfer that into a property that is worth £300k with me taking a mortgage for £100k. The Trust will own two thirds and I will own a third

MWT

djbaum said:

I'm not looking to encumber assets owned by the trust. The Trust value is currently c.£200k and I'm looking to transfer that into a property that is worth £300k with me taking a mortgage for £100k. The Trust will own two thirds and I will own a third

The lender will have a charge over the entire property which includes the Trusts assets, I know it is not your intention for the Trust to suffer any loss but it is impossible to 'ring fence' their portion of the larger house if you are getting a mortgage.

Do let us know how this works out though, I am genuinely curious how the Trustees can reconcile their obligations to protect the assets of ultimate beneficiaries, but also respect the way the Trust has been setup if it includes specific provisions to allow trading up to a larger property.