Arrangement Fees from Advisors for Equity Release - Do I need one?

MWT

Leodogger said:

You seem to forget that the equity release sum of money doesn't get paid until the death of the second person (or they go into care) but by then after the Trust is triggered on the 1st death 50% of the equity has already passed in the Trust to one of our children so that the Lender cannot get access to it, so the rest is irrelevant!   I thought the same as you until the Age Partnership advisor explained it to me.   A trust overrides anything else in the will and I don't believe a lender can put a first charge on the property that overrides the Trust.

Not forgotten at all, but you can't put more into a trust than you have the right to in the first place, and an encumbered asset remains encumbered, the will, and the trust that is triggered by the death can't extract 50% of the ownership without taking the same share of the charge with it.

It feels like there is a lot of confusion here and you may need to get a solicitor involved upfront to get things clarified, but in general principle, tenants in common can still get equity release, and the ability to pass one partners residual share to someone other than the other 'tenant' can be protected, it just can't be extracted from the asset without selling it and settling any charges on it before distributing the appropriate share of the residue.

The sort of problems that could be involved in the trust that would be an issue, would be if the trust rights included permitting the beneficiaries to occupy the premises... That would cause an issue for Equity Release, as the expectation is that there would be vacant possession upon the death or entry into long term care of the 2nd life...

In general though this is no different to what would happen if there was an ordinary mortgage involved.

In any event we go around in circles now, talk to your solicitor and the Equity Release advisor to get straight what needs to be done to achieve your aims...

Leodogger

MWT said:

Leodogger said:

You seem to forget that the equity release sum of money doesn't get paid until the death of the second person (or they go into care) but by then after the Trust is triggered on the 1st death 50% of the equity has already passed in the Trust to one of our children so that the Lender cannot get access to it, so the rest is irrelevant!   I thought the same as you until the Age Partnership advisor explained it to me.   A trust overrides anything else in the will and I don't believe a lender can put a first charge on the property that overrides the Trust.

Not forgotten at all, but you can't put more into a trust than you have the right to in the first place, and an encumbered asset remains encumbered, the will, and the trust that is triggered by the death can't extract 50% of the ownership without taking the same share of the charge with it.

It feels like there is a lot of confusion here and you may need to get a solicitor involved upfront to get things clarified, but in general principle, tenants in common can still get equity release, and the ability to pass one partners residual share to someone other than the other 'tenant' can be protected, it just can't be extracted from the asset without selling it and settling any charges on it before distributing the appropriate share of the residue.

The sort of problems that could be involved in the trust that would be an issue, would be if the trust rights included permitting the beneficiaries to occupy the premises... That would cause an issue for Equity Release, as the expectation is that there would be vacant possession upon the death or entry into long term care of the 2nd life...

In general though this is no different to what would happen if there was an ordinary mortgage involved.

In any event we go around in circles now, talk to your solicitor and the Equity Release advisor to get straight what needs to be done to achieve your aims...

I already did as I explained and Age Partnership said it would need removing, the solicitor hadn't a clue because she said it all rests with the Lender's criteria for lending the money and the other advisors agreed with Age Partnership.  The only other thing the advisors agreed on was that you can have a Tenants in Common will but not a Property Protection Trust as part of it.   I am going to speak to another few specialist equity release solicitors about this tomorrow.

MWT

If the property was already subject to the trust due to the demise of one of you, then there is no doubt that the surviving partner would not be able to use an equity release product.

Until that time you should be able to find a lender that will accept the plan to use the protection trust but certainly not all lenders.

However even if you do find a lender willing to accept it, you may find that the existence of the equity release loan causes problems in using the trust in the way it was originally intended.

In the end though this all becomes somewhat academic as if your advisor cannot find a lender willing to accept it you will have little alternative but to remove it.

I hope you find what you need though, however it turns out...

Leodogger

MWT said:

If the property was already subject to the trust due to the demise of one of you, then there is no doubt that the surviving partner would not be able to use an equity release product.

Until that time you should be able to find a lender that will accept the plan to use the protection trust but certainly not all lenders.

However even if you do find a lender willing to accept it, you may find that the existence of the equity release loan causes problems in using the trust in the way it was originally intended.

In the end though this all becomes somewhat academic as if your advisor cannot find a lender willing to accept it you will have little alternative but to remove it.

I hope you find what you need though, however it turns out...

There has never been any charge or anything on the Title Deeds and we are both alive from when we took out the Trust Will 5 yrs ago so there is nothing to stop us on that count.     One advisor did find one lender who was willing to ignore the PP Trust and that was Aviva but at an extortionate rate of interest and would only give us 85k instead of 100k.    So we will keep looking.

Leodogger

UPDATE -   Phoned the ER Lender today and they said that they have to be the first charge on the Land Registry so this would mean removing the Form A Restriction.    I am now trying to find the cheapest solicitor who can carry out the new wills and removing the Restriction from the Register.   Once that is done, then we can look for the best ER Plan.

mrsnobody

Leodogger said:

UPDATE -   Phoned the ER Lender today and they said that they have to be the first charge on the Land Registry so this would mean removing the Form A Restriction.    I am now trying to find the cheapest solicitor who can carry out the new wills and removing the Restriction from the Register.   Once that is done, then we can look for the best ER Plan.

I work in lifetime mortgage compliance, and I'm pretty sure you have been misinformed by said lender.  The Form A restriction simply denotes the Tenants in Common ownership and won't prevent a lender registering a first charge.  Providing both owners are still alive and the property has not already been put in trust, most if not all lenders will accept this scenario.  As MWT said upthread, it only affects access to the drawdown facility/further borrowing once one owner has passed away.  Obviously if this is a concern to you, you may want to remove the Form A restriction but it shouldn't be a requirement in order to proceed with equity release.  I would urge you to check this again with a solicitor who understands lifetime mortgage lending.

Leodogger

mrsnobody said:

Leodogger said:

UPDATE -   Phoned the ER Lender today and they said that they have to be the first charge on the Land Registry so this would mean removing the Form A Restriction.    I am now trying to find the cheapest solicitor who can carry out the new wills and removing the Restriction from the Register.   Once that is done, then we can look for the best ER Plan.

I work in lifetime mortgage compliance, and I'm pretty sure you have been misinformed by said lender.  The Form A restriction simply denotes the Tenants in Common ownership and won't prevent a lender registering a first charge.  Providing both owners are still alive and the property has not already been put in trust, most if not all lenders will accept this scenario.  As MWT said upthread, it only affects access to the drawdown facility/further borrowing once one owner has passed away.  Obviously if this is a concern to you, you may want to remove the Form A restriction but it shouldn't be a requirement in order to proceed with equity release.  I would urge you to check this again with a solicitor who understands lifetime mortgage lending.

That is really interesting, not least because the first time I rang More2Life and spoke to someone on "General Enquiries" she said that they regularly lend to people who have  "Tenants in Common" on their Land Title, yet when I rang the same Lender the second time and I was put through to Customer Services, his exact words were, you would have to remove the Property Protection Trust and when I asked about the Form A Restriction at the Land Registry and would it need removing, he said "probably", I took that to mean that the Trust was registered on the Land Registry, so does this mean we don't have to do anything at the Land Registry ?   But then how does the Lender know that the PP Trust has been removed, do they insist on copies of the new wills ?

MWT

It still feels to me that the various people you are talking to are getting a little confused about the way you are referring to things like the Property Protection Trust, and the restriction, which is why I suggested that you talk to your solicitor about this.

I may have also misunderstood some of the things you have talked about as well, but let's see if I've got this straight...

Right now, the property is held in both of your names as Tenants in Common and you have a form A restriction to that effect registered against the title at the Land Registry?

You have also created wills and a Property Protection Trust in preparation for the day when one of you dies and the intention is to transfer the 50% ownership of the deceased into the trust at that point?

So right now the trust is empty with no assets?

Since there is no trust with any title to the property, the existence of the empty trust vehicle should not have any impact on the Lifetime Mortgage...

Where this may come unstuck is that the intention to place the 50% ownership in the trust upon death, may be frustrated by the existence of the mortgage charge on that 50%, as the trust cannot obtain clear unencumbered title to the property without the mortgage on the entire property being repaid first... That is a question for your solicitor though, and should be of no consequence to the lender at this point in time but may impact on the objectives which drove you to create the trust vehicle in the first place...

Leodogger

MWT said:

It still feels to me that the various people you are talking to are getting a little confused about the way you are referring to things like the Property Protection Trust, and the restriction, which is why I suggested that you talk to your solicitor about this.

I may have also misunderstood some of the things you have talked about as well, but let's see if I've got this straight...

Right now, the property is held in both of your names as Tenants in Common and you have a form A restriction to that effect registered against the title at the Land Registry?

You have also created wills and a Property Protection Trust in preparation for the day when one of you dies and the intention is to transfer the 50% ownership of the deceased into the trust at that point?

So right now the trust is empty with no assets?

Since there is no trust with any title to the property, the existence of the empty trust vehicle should not have any impact on the Lifetime Mortgage...

Where this may come unstuck is that the intention to place the 50% ownership in the trust upon death, may be frustrated by the existence of the mortgage charge on that 50%, as the trust cannot obtain clear unencumbered title to the property without the mortgage on the entire property being repaid first... That is a question for your solicitor though, and should be of no consequence to the lender at this point in time but may impact on the objectives which drove you to create the trust vehicle in the first place...

I just wrote to my solicitor to ask if a Lender can put a first charge on the Land Registry title if there is a Form A Restriction without removing the restriction and this is what she replied back with :   "It will be on your deeds? Can you scan a copy to me of your up to date office copy entries or even forward that to your lender" !!!    I have no idea what she is referring to as "office copy entries"?   Do you ?   She drew up the PP Trust so surely she knows what is on the Land Registry and Deeds?    Or am I being naive here?   By the way you have summarised our current position correctly.

MWT

Leodogger said:

I just wrote to my solicitor to ask if a Lender can put a first charge on the Land Registry title if there is a Form A Restriction without removing the restriction and this is what she replied back with :   "It will be on your deeds? Can you scan a copy to me of your up to date office copy entries or even forward that to your lender" !!!    I have no idea what she is referring to as "office copy entries"?   Do you ?   She drew up the PP Trust so surely she knows what is on the Land Registry and Deeds?    Or am I being naive here?   By the way you have summarised our current position correctly.

She will know what they filed at the time, but that is not necessarily what is there now, so she is just asking you to obtain copy of the register of title (also known as office copy entry) and send it to her, or to the lender to get the answer as she is rightly inferring that it is really a question for the lender...

The question I would have asked her is will the existence of a first charge over the property interfere with the ability to put the 50% ownership of the deceased into the Property Protection Trust? - this is something that wasn't a factor when you formed the strategy with your wills and the trust so may not have been discussed at the time...

Also, just by way of explanation, the purpose of the form A restriction is to put others on notice that any proceeds of sale from the property cannot simply be given to one party in discharge of their obligations as there is notice given that it is not the intent of one party for their share to devolve to the other party in the event of their demise.