Can I take out a mortgage on a property that I will inherit a third of for renovations?

Posted on 7 September 2007

I live with my parents in a large house which has no mortgage. Is it possible to take out a mortgage so we can do some renovations?  I will inherit 1/3rd of the house upon my parents death.


Hi Sherry,
 
Unfortunately you cannot secure a loan on property which will only potentially pass to you in a given time frame. However, you do have a few options:

 

  • Your parents can take a mortgage on their property with you as the guarantor if you are the only one with income.
  • Your parents can transfer part of the property to you now if you wish.  You should seek legal advice from a solicitor on this.  This would make you shared owners, so you can share a normal mortgage.
  • If you are looking for less than £25,000 you could take a personal loan, which would be unsecured. 

Another option for your parents is to consider a Home Equity Release Mortgage, although the interest is compounded annually and taken on death, so can be relatively costly compared to a standard mortgage paid monthly by an earner.  Contact SHIP for details of these.

On another note, if they have a large property you may be liable for a lot of inheritance tax when it passes to you.  Please consider covering your parents with a life assurance policy to cover the liability, which could be around 40% of the value after their allowance.

Best of luck,

Katie

Category: Equity release, Remortgaging, Tax issues, Unsecured loans

 

Answers provided in response to Ask Bea are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of Charcol Limited. All comments are made in good faith, and neither Charcol Limited nor Bea will accept liability for them.

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