Being left buy to let house in will and changing to standard mortgage

[sparkdoor]

My mother in law is terminally ill and leaving us a house she owns as a landlady. She is also leaving us a pension payment which will pay almost all of the mortgage. We want to remortgage the last little bit and own the house ourselves, so a personal mortgage. How would we go about doing this? Should we pay the lump sum to the current buy to let mortgage provider and then somehow swap the last little bit to another one? I'm not sure how any of this works. Thanks :)

[notsogoldenoldie]

Mmmm....interesting. Any "standard" mortgage provider will insist on some sort of disclaimer if the house is let, however it may not be permissible. If the remaining mortgage is small, it may be too small to remortgage.

On one of my btls I had to gain permission to let; on the other, which I bought on a btl, I couldn't borrow less than £50k.

I'd get an independent adviser, if you can find one.

[Athenaviolet]

Get an independent financial advisor (who isn't tied to certain lenders) to give some advice. Got to 2/3 to get some different opinions.

Is the pension payment a lump sum? If it won't pay off the mortgage and you have a shortfall the bank could force a sale.

It depends on lots of things like the ltv/the rent /the mort payments the equity.

[sparkdoor]

We don't want to let it, we want to live in it. Is that likely to be an issue? What do you mean by a disclaimer? Just to make it more confusing, we are the current tenants. She just wants us to have it for ourselves now.

[Penfold007]

Once your MIL dies the mortgage and any debts become payable in full out of her estate. Does she have life insurance tied to the mortgage?

If there is no insurance the mortgage company could accept the lump sum as part payment then offer you your own mortgage for the remainder.

[sparkdoor]

No life insurance. The amount left to pay would be less than 10,000. Can we not remortgage with a residential mortgage inatead from a different mortgage company, after paying our lump sum?

[PotteringAlong]

It's usual as a condition of having a mortgage to have life insurance to pay it off so you might find it's paid.

[PotteringAlong]

Ah, cross posts. At less than £10k if needed could you not stick it on an interest free credit card?

[sparkdoor]

Not sure we could get a credit card, not sure of anything really. We do not have much income. Couldn't currently get a mortgage under normal circumstances. Is it really out of the question to just give them the money and then change providers and get a mortgage for the rest? It seems straightforward to me, but I'm clueless. Pretty certain she doesn't have life insurance, we talked about it and she said she was considering taking it out but then didn't.

[crabbyoldbat]

Many (probably most) people have life insurance tied to the mortgage, which pays out in the event of death, clearing the mortgage debt. If she has this, there's no problem, so check that out first. You may be in a better position than you think!

Looking at it from the point of view of you (that's you and your dh) being the executor of the will, what would normally happen is that you would 'realise all the assets' (sell the house) and then distribute the money(after paying off any debt) to the beneficiaries. So you'd put the house on the market, and wait for offers. Once you get one, you sell to the new person and pay off the mortgage, and dole out the money.

As your mother's pension beneficiary (which is usually separate to the assets for the will), you/dh will get that money without (probably before) the estate is settled. Now you have a lump sum for a deposit. You could go to a mortgage broker or provider and ask for a mortgage 'in principle' while you look for a house to buy.

Oh look! by coincidence, the one you're currently renting is on the market - and you'll only need a tiny mortgage to buy it, what with the huge deposit you've got! How fortuitous - why not put an offer in with the estate agent?

So check out - is there mortgage insurance? Is the pension payment part of the estate, or is your dh a 'named beneficiary' of the pension (and therefore its not part of the estate)? You'll probably need to get a couple of different layers involved - one to ensure the rights of the will's beneficiaries are served, and one to ensure the rights of the house buyers are served!

Legal advice and independent financial advisor advice probably very worth taking to check if this is how it'll work (I am not a lawyer)

[crabbyoldbat]

sorry, took a long time writing - cross post.

Still, advice to double check what cover she's got stands. For £10k, you might be looking at a loan, rather than a mortgage, though.

[prepperpig]

Yes the others are right, the current mortgage is a red herring. When your MIL dies that mortgage will have to be paid off. You need to obtain a separate mortgage for it to make up your shortfall.

[Penfold007]

If you can convince the lender than you can pay the repayments you should be able to get a loan. £10k is surely only a fraction of the value of the property so the lenders risk is minimal.