Implications of trust used to pay down mortgage in blended family

Sausmeister

Mr and Mrs smith are married.

they have a 300k mortgage on a £750k house, tenants in common 40/60 split

Mrs smith is a beneficially of a family trust following the passing of her parents.

Mrs smith wants to pay off £150k of said mortgage with money from trust.  She accesses the money by way of a loan from the trust which must be repaid upon her passing.

does the mortgage lender need to know the source of this money?

what are the implications of reducing the mortgage in this way? 

Mr smith is not very comfortable with this arrangement and doesn’t understand the potential future consequences at all.

Emmia

Surely the big risk is Mr Smith having to either sell the property, or remortgage again later on to repay the trust (would he be able to get a mortgage then on whatever income he has? pensions? Salary?)

Would he just be repaying the £150k, or would it be £150k + interest accrued over the period between the trust paying out, and the death of Mrs Smith.

What happens if Mr Smith dies first?

Personally I'd prefer just to pay the mortgage off in the usual way, and avoid this complexity.

Keep_pedalling

This would require the trust to place a second charge against the property which the current lender might not be too happy with. There may also be tax implications for the trust.

sheramber

Keep_pedalling said:

This would require the trust to place a second charge against the property which the current lender might not be too happy with. There may also be tax implications for the trust.

But the mortgage would be paid off with loan.

northwalesd

sheramber said:

Keep_pedalling said:

This would require the trust to place a second charge against the property which the current lender might not be too happy with. There may also be tax implications for the trust.

But the mortgage would be paid off with loan.

Won't there still be a £150k mortgage?

Sausmeister

northwalesd said:

sheramber said:

Keep_pedalling said:

This would require the trust to place a second charge against the property which the current lender might not be too happy with. There may also be tax implications for the trust.

But the mortgage would be paid off with loan.

Won't there still be a £150k mortgage?

Yes still £150 mortgage but also the trust owns £150 repayable upon the passing of the trustee.

sheramber

Sausmeister said:

northwalesd said:

sheramber said:

Keep_pedalling said:

This would require the trust to place a second charge against the property which the current lender might not be too happy with. There may also be tax implications for the trust.

But the mortgage would be paid off with loan.

Won't there still be a £150k mortgage?

Yes still £150 mortgage but also the trust owns £150 repayable upon the passing of the trustee.

Missed that.