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Jo C.
Jo C., Barrister
Category: Law
Satisfied Customers: 71051
Experience:  Over 5 years in practice
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My father passed away recently leaving his property to myself

Customer Question

My father passed away recently leaving his property to myself and my sister. Although the fair thing would be to sell it and divide take half each, my husband & I would like to live in the property. We currently rent from a housing association, have 2 adult children still living at home and my husband will retire in 4 years. We don't have the financial means to buy my sister out but is there any way we could raise money on the property to do this?
We have heard of equity release schemes but these seem to not be recommended. Can you advise us please. Thank you.
Submitted: 3 years ago.
Category: Law
Expert:  Jo C. replied 3 years ago.

Thank you for your question. My name is Jo and I will try to help with this.

Will your sister agreed to sell her share to you?

Have you agreed the value?

Bearing in mind that you would be raising finance on half of the property, can you still not afford that mortgage?
Customer: replied 3 years ago.

We haven't properly discussed it yet. I think she would be willing to sell her half to us though. She lives in a different area, owns her home with her husband and has no children. The problem is that I doubt we could raise a mortgage and due to our age would only have 5 years to pay it anyway. The property is worth approx k 280. What we need to do is raised raise about 140 but without making repayments. Is there any way to do this where the bank/mortgage company own half & we own half but don't make repayments. In short, we want to own our half & live in the property, give my sister her half in cash & leave our half to our children when we go.

Expert:  Jo C. replied 3 years ago.

There is no legal reason why this cannot be done however there are probably financial reasons why it cannot be done because you would only have 50% equity in the property.

With 50% equity in the property, the interest on a mortgage of £140,000 would use up the equity extremely quickly.

There are certain practical problems whereby the solicitor would have to undertake to pay your sister from the mortgage proceeds

The first thing to do is to speak to a specialist independent Mortgage Broker who can make enquiries as to whether you would be able to raise the money on an Equity Release basis based upon 50% equity. That is for the lender to consider.

The only way of doing this is through Equity Release, however the situation with equity release is that the property is owned by the mortgage company when you eventually die. I will tell you that it is extremely unlikely because of the limited equity that you will find a lender to do this.

What you want to do whereby you give your sister half in cash and leave your half to your children is actually an impossibility unless you pay the mortgage

Can I clarify anything for you?

Customer: replied 3 years ago.

Thanks for your reply. My idea was that we would own 100% of the property, releasing 50% of the equity to my sister. So the equity release would be on 100%.

This would mean that we owned half & the mortgage company the other half. Could we pay the interest only so that only the original sum would be payable after our deaths?

How can we calculate what the interest would be?

Thank you.


Expert:  Jo C. replied 3 years ago.
Equity release mortgages are sometimes called lifetime mortgages.

In effect what you are doing is rolling up interest on 50% of the property equity however to make this viable.

I just used one of the online calculators and if you had a property worth £200,000 and the youngest owner was aged 65, the maximum you could get on equity release is £61,500.

When the last person dies, the house is then sold by the mortgage lender. There is nothing for the children that is how it works otherwise it is simply not worth the lenders doing it.