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I bought my son a house in 2004, on which (I learned recently)

he immediately took out a...
I bought my son a house in 2004, on which (I learned recently) he immediately took out a 'no questions asked' interest only mortgage of £75,000, now owned by RBS. The capital is repayable in 2015.

There is a complicated background to this, but put briefly, my son had and still has medical problems, was unemployed at the time of the loan and is unemployed now. There is no prospect that he will be able to repay the capital, and meanwhile, I am paying the monthly interest (still thankfully at a low level). I assume RBS will simply repossess the house in 2015.

The only answer would appear to be for me to obtain 'equity release' on my own house, though naturally I am reluctant to do this. I am a widower aged 84, though still in my right mind (just).

I'd be very interested in any comments you might have.

XXXXX XXXXX
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Answered in 3 minutes by:
10/8/2012
Thomas
Thomas, Lawyer
Category: UK Law
Satisfied Customers: 7,631
Experience: BA (Hons), PgDip, Practising Solicitor
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Hi,

I assume the house is based in the UK. I am a UK solicitors.

Did you son have the mental capacity to understand the implications of his decision to take the loan?

Tom
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Customer reply replied 5 years ago

Hi. Yes, the house is in England (as is mine). My son has a long history of mental issues, not of the mental deficiency kind. He was a computer programmer with a BSc (Hons). I have not been privy to his mental diagnoses down the years, but I understand he is currently classed as paranoid schizophrenic, and on benefit accordingly. At the time he took out the mortgage I believe he had not registered with a doctor, nor was he receiving benefit. He is quite stable at present.


 


Peter

Hi Peter

Thanks for your patience.

The difficulty is that unless it was obvious that you son did not have the mental capacity to understand the implications of the decision to enter the mortgage then you are not going to be able to claim the mortgage is unenforceable.

The lender and the solicitor acting for your son would be under an obligation not to proceed if it were plain that your son did not have mental capacity, but if it were the case that he appeared reasonably normal or at least cogent and able to understand the implications of the decision then that would discharge their respective duties.

On this basis the mortgage would be enforceable.

If he is not able to repay the capital then the bank would look to repossess. This is not desirable because they would add their legal fees on top of this and would also not be motivated to achieve the best possible price to conserve the equity in the property.

I would consider encouraging your son to sell the property before this happens or to remortgage once he has a sufficient income.

It’s a very difficult situation, you have my sympathies.


Please remember to RATE my answer OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE or above if you are satisfied that you have received the correct legal advice (even if it is not the answer you wanted to hear), otherwise I do not receive any credit for answering your question.

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Kind regards,


Tom

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Customer reply replied 5 years ago

Hi Tom. Thanks very much for this - bad news though it is.


 


I have one further query: would my son be in a position to sell if (as I suppose) the mortgagor will be holding the deeds?


 


Peter

Hi Peter.

Yes, of course. Thhe title to the property is registered at the Land registry, there is no such thing as "deeds" to properties these days.

The lender will have a resctriction on the registered title which means that the property can only be sold provided that the mortgage account is redeemed upon compleiton.

Your son's conveyancing solicitor woudl redeem the mortgage from the proceeds of sale and then send any balance to your son.

Please remember to rate my answer.

Kind regards.

Tom
Thomas
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Customer reply replied 5 years ago

Hi Tom


 


In regard to our above exchanges, I am continuing to investigate ways forward.


 


If my son were to sell his house at some time between now and Nov. 2015 (when his mortgage is due for repayment) the proceeds after repayment would not enable him to buy elsewhere, and I cannot be confident his circumstances will improve sufficiently for him to be able to obtain a new mortgage either where he is or elsewhere.


 


I have therefore explored the equity release market and believe I am in a position to redeem his mortgage by equity release on my own house. But I would need to safeguard the future against new follies. I believe this would mean taking his house back into my own name, and possibly leaving it in my Will to my daughter (who now resides in Australia), on condition that she guarantees him occupancy (where he is or at a different address) in his lifetime. Or possibly some kind of trusteeship might be possible (if affordable).


 


If a way could be found through all this, I believe it might be best to act quickly while mortgage rates (fixed for the equity release proposition) are low.


 


This is of course a complicated mess, but I would appreciate any general comments on the legal processes etc.


 


Thank you.


 


XXXXX XXXXX

Hi

I will have to reply tomorrow morning.

Tom
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Customer reply replied 5 years ago

Hi Tom


 


I don't seem to have heard from you....?


 


XXXXX XXXXX


5.12.12

Hi Peter,

Sorry, I must have forgotten to reply.

Technically this is a separate question, but I will answer anyway.

If you are able to secure sufficient release of equity from your own home then you can purchase the property from your son. I would suggest that the purchase price of the transfer be the redemption amount of the mortgage your son holds.

The property woudl then be in your sole name and would be unencumbered. He could stay there with your consent obviously, but would not be able to encumber the property with further legal charges because he would not have title.

It is up to you how to leave your estate upon your passing. You could leave the property to your daughter subject to your son being able to stay there for the rest of his life, though if they are of approximate age it may be that the utility of this inheritance to your daughter is effecitvely reduced since she would have to wait for his passing. You coudl make his life interest subject to him not buying another propety, so that if he did then your daughter could then take the property.

Tom
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