Second Charge on a Property


D

DerbyBorn

Through an inheritance our daughter has sufficient money for a 60% deposit
on a house. She has recently married and we are keen to protect her
contribution as well as we can and have started to consider setting up a
Trust Fund and having the fund loan her the money toward a new house.

How will Mortgage Providers react to this. I understand it will be termed a
"second charge" on the property.
 
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D

David Woolley

Through an inheritance our daughter has sufficient money for a 60% deposit
on a house. She has recently married and we are keen to protect her
contribution as well as we can and have started to consider setting up a
Trust Fund and having the fund loan her the money toward a new house.
Is this from your daughter's inheritance. If she creates a trust that
is actually effective, I believe it will be a gift 'with reservation of
benefit', which has interesting inheritance tax implications. Maybe she
could arrange a deed of variation on the original will so that she never
actually receives the money. Even then it may be subject to some
inheritance tax. I suspect a useful trust would not be allowable for
PETs, so there could be lifetime tax charges. At least the impression I
get on a short bit of research is that the taxation situation is very
difficult to understand.
How will Mortgage Providers react to this. I understand it will be termed a
"second charge" on the property.
I assume the loan would have to be secured for that, but, if not
secured, I imagine the scheme could be easily defeated. I'd guess the
difficulty might be in ensuring it really was a second charge, so the
provider had first call when they foreclosed, even though it would
actually have to be made simultaneously.

I wonder if a simple tenants in common arrangement could achieve the
aims of the arrangement.

If the inheritance is your daughter's, won't the husband see such
arrangements a large vote of no confidence.

Generally, I see so many pitfalls, that I don't think you should be
relying on non-lawyers on newsgroups to validate your solution.
 
D

DerbyBorn

We are dealing with a Lawyer on setting up the trust. The next step is for
her and her husband to get a mortgage offer for the 40%. I want to find if
this is likely to hit any snags.
 
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D

DerbyBorn

Seems like the best solution.
The money was actually left to her mother - but the underlying intention
(will not completed) was that the daughter would benefit.
Legally - the money is currently her mother's money.
 

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