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Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I ask if your mother understands the potential risk of repossession in respect of her propery if payments are not kept up to date please? Has this been fully discussed?
Thanks. Yes it has. Worst case scenarios have all been discussed.
Thanks. XXXXX understand correctly that your mother does not propose to gift any equity in the property to you but rather wishes to allow you to use the property as collateral for raising a mortgage? may I ask if you have a mortgage on your present flat? if so, would you propose to pay off this mortgage with the money you borrow against your mother's property?
Not a gift no, a means to an end – that is my partner and I buying a bigger home. We currently have a mortgage on our flat. We would use the funds raised from the mortgage on mum's house to buy the share of the flat owned by the housing association.
Thanks. Finally would you be expecting to maintain your existing mortgage or would you also be using the funds to pay off your existing mortgage?
Maintain our current mortgage. From an affordability point of view it's possible as it's not a substantial mortgage.
thank you. Based upon what you say, I believe there are three individual steps that will need to be taken in order to realise this proposal. Mortgage arrangements, transfer of legal title and finally the agreement of any trusts between you, your sister and your mother. With your permission, I will take each of these in turn:
the first perhaps obvious step is mortgage funding. Given your circumstances, I believe you will need to arrange to see a mortgage broker in order to arrange mortgage funding rather than high-street lender because most lenders require a minimum of three years of accounts for self-employed persons whether or not they are trading through a limited company. there are lenders that will accept two years worth of accounts however they typically will be available through mortgage brokers rather high-street directly. there may also be an issue with regards XXXXX XXXXX taking a second mortgage in addition to that which you currently have and again, a broker will be able to advise whether he has any loans which will allow for the circumstances. If no lender will give you a second mortgage, you may need to consider a change to your proposal whereby you take a larger mortgage alt on your mother's house in order that you can pay off your existing mortgage and perhaps of your mother some form of security over your current property if she wishes it either by way of a private charge or by way of a simple bare trust. the first accordingly, it would be to make an appointment with one or more mortgage brokers order to discuss mortgage options available to you before you move too much further thing else
mortgage arrangements provided for, the next step is to deal with the legal aspects of transferring the legal title of your mother's house into joint names and securing the mortgage against the property. For this, solicitor will be required because apart from anything else, the lender will require a solicitor to be involved and typical costs for the legal transfer and mortgage would be anything from £350-£600 plus VAT.
the final step which in practice may be undertaken at the same time as the legal arrangements for the mortgage is to agree private arrangements between you, your sister and your mother in order that all three of you have the protections each of you require. Based on what you say, the principal beneficiary of the arrangement will be you and your partner and your mother and sister are burdened with the risks of affording this benefit, in particular your mother, and even more particularly if you find that cannot obtain a second mortgage and therefore you will need to consider a larger mortgage on your mother's property in order to pay off your existing mortgage as we discussed above.it would be sensible therefore to consider putting in place a trust deed in respect of your mother's property which provides that although all three if you will be the new legal owners of the property as will be required in order to obtain a mortgage, all of the equity in the property remains your mothers either absolutely or as a life interest. In addition, your mother may require further provisions that provide that the money you obtain under the mortgage is a loan and must be repaid at a certain point or whatever arrangements or agreements you come to in this respect and finally, your sister and mother may require some form of indemnity from you in respect of mortgage payments in the assumption it will be you is making mortgage payments because as they will be jointly named on the mortgage, legally, they will share joint responsibility for the mortgage.
this final third step, is very much a matter to be agreed privately between you, your sister and your mother and any such arrangements you decide to formalise in the form of trust or otherwise would need to be dealt with by a solicitor other than that acting for the lender because mortgage lenders do not like trust arrangements. providing your mother continues to own her property absolutely or as a life interest, there would be no adverse tax implications providing she continues to live in her property or whichever property she decided in the future to move to and providing that the mortgage that would be taken out on her property would be less than £375,000 - if it were more than £375,000, there could be stamp duty implications in your proposal but I will assume this is not relevant unless you tell me otherwise
Is there anything above I can clarify for you?
Not at the moment. Can I take an hour or so to digest?
Of course you can.
I will be available until 2pm if you have any follow up questions. Is there anything else I can help you with for now?
Thanks. Not for now. I'll be in touch.
I have arragned to discuss the above with my family so will be in tough with any follow up questions on Monday.
Have a good weekend.
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