Remortgage on an inherited house?

[marksa222]

Not sure who to ask about this, but you guys seem like a knowledgable bunch, so why not?

My Nan suffers with dementia and is in a home. Her house, will be presumably left to my mum as she is an only child. She's been in the home for a few years and already has thousands built up which will be payable when she passes away (within 58 days of passing I think). My Mum couldn't afford this herself, but ideally would prefer to keep the house. Would remortgaging the house, and renting it out to cover the mortgage she'd be paying back be an option? If so, and she for example remortgaged £50k, is it likely that she'd get a better rate than say a first time buyer borrowing 80%? Would her credit rating have to be decent too? After all, if she didn't pay it back, the house would be worth alot more that she borrowed... not that she wouldn't pay it.

 

[calumscott]

A good few assumptions there...

So if the home are providing care up front with payment due on death, they will have some kind of legal claim on your Nan's estate. The executor of her will will have to settle all debts from the estate before then passing the remainder on to the beneficiaries.

If the contract with the care home is underwritten by the property then I'm not sure exactly how it would work but the executor would have to sell it to release the capital to pay the contract.

If your Nan's will bequeaths the house to your Mum then I see no reason why an arrangement by which your Mum takes a mortgage to cover the cost of the care secured on the house couldn't be achieved. Effectively instead of the executor selling the house on the open market, paying the bill then giving your Mum the rest of the money, the portion of the house required to pay the bill is sold to your Mum and she inherits the rest...

IANAL, of course. You should probably have a chat to your solicitor. They should advise on what's possible for free in the hope that you use them to do the legal work. :thumb:

 

[marksa222]

Thanks. Her care is subsidised by approximately 50% by her pensions. The remainder is going to be owed by the executor of the estate (presumably my Mum).

I think you're right about the solicitor. I know literally nothing about this sort of thing... I haven't done yet as I assume they charge for that sort of meeting. Also, I wasn't sure about seeing a financial advisor instead?

I just wondered if that type of mortgage existed... I can't see why it would be a problem, but i'm thinking of renting the house off her in the short term to slow down the amount she will owe, but if she passed away the next week, and my mum was forced to sell, i'd be screwed.

 

[graysalchemy]

I agree a solicitor is who you should be talking to. :thumb:

 

[calumscott]

I would say you probably want both the solicitor and FA.

The solicitor to make sure that the legalities of the contracts with the care home can be met and the FA to get a good deal for the mortgage and/or any other investments WRT the remainder of the estate.

Both should afford you a freebie meeting or email conversation as that way you are likely to use them for the paid work. I have a brilliant relationship with my solicitor and that's how they roll, I can ask him about any old thing and he'll tell me how it has to be done then when I'm ready I get him to do it and pay his salary...

It would be a standard re-mortgage mortgage I think, or possibly even a standard purchase mortgage. Like I say it depends on the legalities of the transfer of the assets from the estate. This is why you need the solicitor.

It may be that the estate legally has to settle the bill in which case the estate could mortgage the house and pay the bill, then sell the house on to your Mum at the value of that mortgage - you double the legal fees. It may be that the solicitor could make legal provision between your Mum and the care home that she takes on the debt, inherits the house, remortgages it then pays the bill - only one set of conveyancing fees but the additional work around the contract with the care home...

If you were anywhere local to me I could recommend you a solicitor whom I trust very much...

 

[marksa222]

Thanks, I'm no where near you sadly. I've just talked to my mum and knows that a solicitor near us has the deeds and a copy of the will. Would it be the best thing to go and see them do you think to start with?

 

[calumscott]

Without a doubt! They already know your family so that has to be a good thing. :thumb:

 

[marksa222]

thanks. I'll get an appointment arranged. As little as I know, my Mum hasn't got a clue what to do either, and she's very much a bury your head in the sand type of person, so she wakes up worrying about it in the middle of the night. Bless her, she'll probably end up inheriting the square root of f.a anyway.

 

[bobsbeer]

I am assuming the house is currently in your nan's name. You would probably need to wait until your nan has passed before your mum could get a mortgage on the property as it would not be owned by her until then, unless she has other assets to borrow against. Your nan could transfer the ownership to your mother assuming she has capacity to do so. Any legal charge would still need to be honoured, but the house would then be in your mothers name and could be used as an asset to borrow against. I agree a solicitor would be my first port of call. Depending on your nan's financial position there could be other things to pay such as death duties. Depending on the value of the property it is easy to get up to the threshold.

 

[marksa222]

Thanks. Sadly she had a fall a couple of years ago which caused a blood clot on the brain, and led to short term memory loss, then complete dementia. She doesn't recognise any of us now, so she is unable to grant power of attorney. As she is incapable of this, my mum has spend a long time getting something called a guardianship order meaning that she can deal with her finances for her. She's responsible for sending her accounts in annually, and taking money for things in the home, i.e. toiletries, hair cuts etc...

We would not try to sell the house while she was alive. It is only when she passes away that my Mum will be presented with a bill for her care that is currently building. She will have to pay for this from her estate, which is only really her house. She may be forced to sell, but if she can remortgage, she'll borrow from the bank, settle the debt in cash, and pay back the bank over 10-15 years, whilst renting the house out to pay for that. I was hoping someone had been in a similar position.

 

[calumscott]

if she can remortgage, she'll borrow from the bank, settle the debt in cash, and pay back the bank over 10-15 years, whilst renting the house out to pay for that. I was hoping someone had been in a similar position.

Basically, the solicitors will enable her to do whatever works best so long as it's legal. Her mortgaging the house now, probably not, you'd need a lasting Power of Attorney to do that and you'd have to get that granted by the Court of Protection and in truth your Nan probably wouldn't still be with us by the time the process was complete.

So your Mum has to wait until your Nan passes on and the contents of her will are known. If the house is willed to her then she has options. It's tricky though because I think the process is kind of fixed and technically the creditors have to be satisfied first. That technically will mean that the house must be sold to release capital to pay the home (and any duties) first before any remaining assets are then given to the benefactors.

That's why you need the solicitor to sort the process out. They could be able to work it all out so that it can happen in a single transaction and save your Mum some money either by renegotiating with the home or selling the house to her at the value needed to settle the debt, the former is definitely doable so long as the home are agreeable, the latter should be fine but there will either be inheritance tax or CGT payable on the remainder. Of course she could buy it from the estate at full market value then take the remaining cash and pay down the mortgage if she could find a lender willing to play ball...

I have no idea which would work best but really you can't do much more than ask a solicitor if they can help sort it all out at this stage.

 

[PD]

Remember you can often get a free 30 min chat with a solicitor without obligation, better than taking advice from all and sundry, however well intentioned.

 

[TRXnMe]

As PD said, you'll get 30 minutes free from any decent Solicitor, also remember that citizens advice beaurau (sp?) is there for this sort of thing and can offer well informed advice to the terminally skint :)

Using your family Solicitor is definitley your best bet, they will understand the position and while probably not giving you 30 minutes free you'll make far more progress in less time as they already understand the legal niceties around the estate.

 

[Dronfieldbrewer]

STOP

Things to consider:

1) Your mum as beneficiary will not be able to use the property as collateral for anything remotely looking like a mortgage on your Nans house as she does not legally own it
2) If your mum has a enduring or lasting power of attourney then as executor she could do some bits and bobs to help your nan, otherwise you are at the mercy of the Court of Protection.
3) You have to be careful regarding Deliberate Deprevation of Assets rulings...step over this one at your peril
4) The local authority will have taken a charge over the house to pay for the care. This is an open ended contract and could deplete the whole of the estate over time.
5) look at immediate needs annuities to bridge the funding gaps in your nans care, this could be done by a very specialised financial advisor...Try googling SOLLA (society of laterlife advisors)...be prepared to pay a fee for the advice...its worth it believe me!!

 

[marksa222]

Thanks for all the suggestions.

We have been very careful and kept accurate records of the outgoings. Every penny has been spent on her, things like toiletries for her in the home and gas bill at her property (very low, just kept the boiler ticking over every now and again). My mum knows she doesn't own the home, and that if she inherits it, it'll be down to her to pay a big bill to the home before she's left with anything.

I'll have a look at the SOLLA and be sure to consult a solicitor in the next couple of weeks.

 

[johnnyboy1965]

First of all I know nothing about this subject ans also don t take any advice given to tou on any Internet site (if you know what I mean).. you must see a solicitor asap. most don't charge for a initial fee for a consultation.
I can see one or two point:-
1, You Nan must have entered a legal contract with the care home, so her fees can be reclaimed after hear passing. If this is so and for eg the house is worth £100,000 and her fees are £50,000 they will sell the house at that price to get their money, and you will loose out.
2, As the house been signed over to the care home already...if so I might not be yours to sell.
3, Getting a mortgage. banks are no longer taking any gambles on mortgage repayments.....They will want to be sure that whoever takes out the mortgage will be able to pay it back, Im a bit concerned about ages/expected working life...if its your Man/ Mom/you.

First stop is a solicitor. asap

 

[marksa222]

First of all I know nothing about this subject ans also don t take any advice given to tou on any Internet site (if you know what I mean).. you must see a solicitor asap. most don't charge for a initial fee for a consultation.
I can see one or two point:-
1, You Nan must have entered a legal contract with the care home, so her fees can be reclaimed after hear passing. If this is so and for eg the house is worth £100,000 and her fees are £50,000 they will sell the house at that price to get their money, and you will loose out.
2, As the house been signed over to the care home already...if so I might not be yours to sell.
3, Getting a mortgage. banks are no longer taking any gambles on mortgage repayments.....They will want to be sure that whoever takes out the mortgage will be able to pay it back, Im a bit concerned about ages/expected working life...if its your Man/ Mom/you.

First stop is a solicitor. asap

Agreed.

My Nan wouldn't have been able to enter in to a contract with the home as she was not of sound mind when they put her in there (she was made to go in there after going missing a couple of times, and the police had to find her... she got the train to where she grew up, which was 20 miles away from hers, and the estate she lived on no longer exists... sad story). My mum battled for months (maybe a year) to get a deputyship order as she was unable to get power of attorney because my Nan wasn't in sound enough mind to grant it, so she couldn't have entered in to this contract either. I'm sure you're right in that they own the house technically. Such a sad state of affairs though, there must be a better way...

I think this all points towards seeing a solicitor.

 

[calumscott]

First of all I know nothing about this subject ans also don t take any advice given to tou on any Internet site (if you know what I mean).. you must see a solicitor asap. most don't charge for a initial fee for a consultation.
I can see one or two point:-
1, You Nan must have entered a legal contract with the care home, so her fees can be reclaimed after hear passing. If this is so and for eg the house is worth £100,000 and her fees are £50,000 they will sell the house at that price to get their money, and you will loose out.
2, As the house been signed over to the care home already...if so I might not be yours to sell.
3, Getting a mortgage. banks are no longer taking any gambles on mortgage repayments.....They will want to be sure that whoever takes out the mortgage will be able to pay it back, Im a bit concerned about ages/expected working life...if its your Man/ Mom/you.

First stop is a solicitor. asap

Agreed.

My Nan wouldn't have been able to enter in to a contract with the home as she was not of sound mind when they put her in there (she was made to go in there after going missing a couple of times, and the police had to find her... she got the train to where she grew up, which was 20 miles away from hers, and the estate she lived on no longer exists... sad story). My mum battled for months (maybe a year) to get a deputyship order as she was unable to get power of attorney because my Nan wasn't in sound enough mind to grant it, so she couldn't have entered in to this contract either. I'm sure you're right in that they own the house technically. Such a sad state of affairs though, there must be a better way...

I think this all points towards seeing a solicitor.

The home won't *own* the house, there was nobody able to sign any property to the care home, it might even be that the local authority are picking up the whole tab and it is they who will claw it back. Either of them *may* have a claim (I think Dronfield is right and it's called a "charge", sounds familiar...) on some of the value of the house registered with the land registry to prevent its sale without their knowledge though.

Go see that solicitor, they are the only ones who will be able to unravel it all for you... :thumb:

 

[johnnyboy1965]

Asd I have said see a solicitor. If your Nan was "persuaded " to sign a contract........etc

 

[TRXnMe]

Thanks for all the suggestions.

We have been very careful and kept accurate records of the outgoings. Every penny has been spent on her, things like toiletries for her in the home and gas bill at her property (very low, just kept the boiler ticking over every now and again). My mum knows she doesn't own the home, and that if she inherits it, it'll be down to her to pay a big bill to the home before she's left with anything.

I'll have a look at the SOLLA and be sure to consult a solicitor in the next couple of weeks.

Not the next couple of weeks, don't leave it that long, make it the next couple of days. If the nursing home is disreputable (there have been a couple of documentaries lately showing some very sharp practice) they are running up a big enough bill to snaffle the house.

Find a Solicitor, make an appointment, be prepared for a few hundred quid as the bill, but if you're protecting the value of the house a few hundred quid is not much to pay out now.