I want to place a BTL Mortgage in a Family Trust?

by Readers Question

15:40 PM, 29th June 2016
About 2 years ago

I want to place a BTL Mortgage in a Family Trust?

Make Text Bigger
I want to place a BTL Mortgage in a Family Trust?

I want to remortgage my BTL flat with a Lender that will allow me to Transfer the Property into an existing family Trust if I should want to do so in the future(the Trust has £80,000 of shares that are not performing well).trust

There is no risk to the Lender in doing this as the mortgage will remain in my name and repayments will continue to come from the rental payments.

Apparently there are a number of Lenders who do not restrict this and often never know as they don’t regularly check the Title.

However so far when we have asked Brokers about doing this the Lenders have refused, as its simpler for them just to refuse even if they don’t usually register restrictions on the Title.

Does anyone know of Lenders who will not place restrictions on Title as a matter of course?

Richard



Comments

Neil Patterson

15:46 PM, 29th June 2016
About 2 years ago

Hi Richard,

I will email our Broker and Solicitor teams and see what they say.

Puzzler

18:17 PM, 29th June 2016
About 2 years ago

See this thread from last week

https://www.property118.com/lender-restriction-title-prevents-beneficial-transfer/88014/

The trust would be the legal owner so the mortgage would not be permitted to remain in your name.

You need a specialist in trust law first. Trust tax is higher than for an individual as well

Tony Gimple

14:48 PM, 30th June 2016
About 2 years ago

The bigger question is not whether you can find a lender or whether title has been changed (no change of title causes all sorts of other problems and could result in the asset not actually being in trust) but whether it will create a chargeable lifetime transfer and thus be subject to an immediate 20% IHT charge and 6% every ten years with a proportionate charge arising as and when any capital funds are transferred to beneficiaries. Also, within the Trust any profit made on the sale of an asset is taxed at 28%, income is taxed at up to 45%.

Richard Thomas

16:38 PM, 30th June 2016
About 2 years ago

Reply to the comment left by "Tony Gimple" at "30/06/2016 - 14:48":

Thank you
I am happy with all this as the Trust has owned one property for two years already
I just need to know which lenders who don't have a restriction on the Trust from being registered on the Title
Apparently some do and some don't but which ones don't?

Puzzler

19:28 PM, 30th June 2016
About 2 years ago

Well, if you find one let us know, I don't believe there are any. Where did this "apparent" information come from? The title has to be same as the loan otherwise they would not be able to realise the charge on the property and so there would be no security for the loan.

Kate Mellor

20:45 PM, 30th June 2016
About 2 years ago

All lenders will register a charge on the charges register against a property used as security for a loan and a restriction against any transfer of title. This prevents the title being changed until the debt has been repaid and this must be physically done by the lender after the loan is fully repaid. They don't ever need to 'check' the title again as the Land Registry will not transfer ownership of the property whilst the restriction is still in place.

If you want to change the title into the trusts name you will have to remortgage with a lender who offers mortgage products for trusts and repay your current mortgage at the same time as you transfer the property ownership.

The only alternative I've heard of is transferring the beneficial interest in the property only whilst the ownership & hence the title remains unchanged. You would essentially become a trustee for the family trust. This may or may not be a suitable solution, you'd have to take specialist advice. There is a detailed write up of this on this site. Type 'beneficial interest' into the search bar.

Badger

15:26 PM, 3rd July 2016
About 2 years ago

What Kate said.

The key to this as I understand it is that it is the beneficial interest that gets transferred to the trust.

I have been advised in the past (proper paid for advice) that it is not even necessary (and indeed preferable not to) to inform the lender.

You remain liable for the loan but of course the trust agrees to recompense you for this cost.

Richard Thomas

12:48 PM, 4th July 2016
About 2 years ago

Reply to the comment left by "Badger " at "03/07/2016 - 15:26":

Wont the Solicitor who deals with this need to inform the Lender?


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

And the landlord vote goes to - ?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More