Leaving a lifetime interest

FlorayG

I've questioned before for a friend who has absolutely no financial acumen whatsoever.
She's living rent-free in a house purchased by a good friend of hers with a large amount of her equity from her previous house and some of his own (She didn't have enough to buy it herself). I have no idea why he was willing to invest in this for her; it seems he really is a very good friend with plenty of money spare. She recently spoke with him regarding her tenancy and worried that she may be asked to move out by his relatives if he dies before she does, but he said he has given her a lifetime interest in his will.
I do know that he has a BTL mortgage on this property (he's told her so) so how can he do that?

anselld

If he dies the mortgage would be paid off out of his Estate and she would retain a lifetime interest in the property prior to it passing to the final beneficiaries.  Not sure what would happen if the Estate was insolvent but that doesnt sound likely to be the case.

Keep_pedalling

Just checking I have the facts correct. She gave him all of the equity of her house sale and with the addition of some of his own money plus a B2L mortgage her purchased another house that she lives in rent free. Is that correct?

If he dies leaving her a life interest in the house, then that will only work if he has life insurance or something else in place to pay off the mortgage as well. 

FlorayG

Keep_pedalling said:

Just checking I have the facts correct. She gave him all of the equity of her house sale and with the addition of some of his own money plus a B2L mortgage her purchased another house that she lives in rent free. Is that correct?

Yes that is correct

FlorayG

Keep_pedalling said:

If he dies leaving her a life interest in the house, then that will only work if he has life insurance or something else in place to pay off the mortgage as well. 

can you have life insurance to pay off a BTL mortgage/

theartfullodger

Wills can be changed. Obvs.. Even her getting copy of current will doesn't mean it won't be changed tomorrow.

What matters currently is what her existing tenancy says about this (or not).  Suggest she perhaps with you) after getting all existing paperwork together go see a solicitor or a local Citizens advice.

Suspect he invested expecting he will get a BIG payday when she dies (or has to go into a home)

FlorayG

theartfullodger said:

Wills can be changed. Obvs.. Even her getting copy of current will doesn't mean it won't be changed tomorrow.

What matters currently is what her existing tenancy says about this (or not).  Suggest she perhaps with you) after getting all existing paperwork together go see a solicitor or a local Citizens advice.

Suspect he invested expecting he will get a BIG payday when she dies (or has to go into a home)

I think he is genuine and doesn't intend to change it ( I haven't met him, but she has known him a very long time).
Her existing tenancy doesn't say anything about it, it's just the normal stuff you get in a tenancy agreement
Yes I hadn't thought of that - if she dies before him, he has a big payout selling the house. But if he dies first what happens?

Bigphil1474

You can pay what you want off with life insurance. Although some people have a life insurance policy which is specifically designed for paying off the mortgage (so reduces in line with the mortgage), there's no actual requirement to pay off the mortgage with it.

FlorayG

Maybe that's his plan then - I'm sure his own house is already paid for he seems to be very flush with money!

YoungBlueEyes

This might be a silly question, but is your friend not on the deeds then? Is there any paperwork to protect the share of the property she paid for?

fourmarks

Please explain, for my tiny mind, how has it come about that she is a tenant in a house for which she has supplied "a large amount of her equity from her previous house".  Did she send her funds directly to the solicitor dealing with the purchase, in which case surely she would have been engaged in discussions with the solicitor, or did she pay the funds directly to her friend?