Life Time Mortgage to a family member

H

How much

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A family member is about to avail of a lifetime mortgage from Spry Finance. In short that type of return on investment would suit my retirement savings profile so I am happy to lend to them on same T&C as Spry. (6.5% compounded monthly) and they only re-pay the debt when they cease to live in the house.

The borrower will get a slightly cheaper deal as I won't charge arrangement fees etc and have agreed no early repayment charges etc. I can also provide the funds quicker than Spry and that is an issue for the borrower

I have covered off the CA tax implications as the loan balance is below 335k (and will be for 25 years even when compounded up).

Is there anything else that people can think to be aware of?

In particular I will want the charge/mortgage to be registered against the property, can anybody recommend a cost effective way of doing that?
 
How much said:
I am happy to lend to them on same T&C as Spry. (6.5% compounded monthly
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It’s a massive amount of wealth linked exclusively to the solvency and good will of one person.

How much said:
In particular I will want the charge/mortgage to be registered against the property, can anybody recommend a cost effective way of doing that?
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This speaks to my above point. If you don’t have faith in their absolute ability to repay you then you probably shouldn’t dip your toe.
 
Dr Strangelove said:
This speaks to my above point. If you don’t have faith in their absolute ability to repay you then you probably shouldn’t dip your toe.
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I'd disagree here; you want a charge so that the funds will be repaid from the sale of the property. I would imagine your Solicitor should be able to get this done for you.

Am I right in saying that the idea is that there's no monthly repayment, the total is rebated once the borrower has passed away?
 
Dr Strangelove said:
It’s a massive amount of wealth linked exclusively to the solvency and good will of one person.


This speaks to my above point. If you don’t have faith in their absolute ability to repay you then you probably shouldn’t dip your toe.
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It's less 5% of my savings. Solvency is irrelevant as the loan is secured against the house with a LTV of sub 20% and the loan repayment is limited at the value of the house. Even if the borrower becomes insolvent then as long as the legal agreement is ok then I am covered as I will be the only person who can 'claim' the house. Goodwill is also irrelevant as there will be a loan/mortgage agreement so I am not dependent on the goodwill of the borrower to repay me

There is no repayment so I don't need to have faith in their ability to repay. Spry lend to people with the worst credit ratings possible because there is no repayments on the mortgage
 
How much said:
It's less 5% of my savings.
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In that case risk is pretty tolerable.

I had misread your OP as suggesting loan balance was in or around the €335k.

How much said:
Goodwill is also irrelevant as there will be a loan/mortgage agreement so I am not dependent on the goodwill of the borrower to repay me
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I don’t want to be semantic but you are. Enforcing secured debt on Irish residential property is very hard no matter how solid your contract is. If their family member doesn’t want to repay you when they leave the house you are looking at expensive and protracted legal proceedings while they are alive.

How much said:
In short that type of return on investment would suit my retirement savings profile
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It seems like a strange retirement profile to be reliant on when the owner vacates the house which could span a range of decades.
 
Dr Strangelove said:
Enforcing secured debt on Irish residential property is very hard no matter how solid your contract is.
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If there is a charge on the property then it has to be paid when the property is sold - that's how mortgages work.

The concern might be if the current owners do something like leaving a lifetime interest to another party, perhaps a sibling; thus significantly delaying the eventual repayment.

Dr Strangelove said:
strange retirement profile to be reliant on when the owner vacates the house which could span a range of decades
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why?

For the sake of argument, lets say the borrower is 75 and the lender is aged 45.
Fast forward 20 years and borrower dies peacefully at 95, lender is now 65 and ready to retire with the lump sum + interest from their investment.

Seems like a good deal to me - provided you can close off any concerns.
 
DannyBoyD said:
I'd disagree here; you want a charge so that the funds will be repaid from the sale of the property. I would imagine your Solicitor should be able to get this done for you.

Am I right in saying that the idea is that there's no monthly repayment, the total is rebated once the borrower has passed away?
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Yes...that is how Spry work and I would replicate this
I am expecting to hire a solicitor to do it but just wanted to know any pitfalls/advice form anyone who may have experience doing this or similar
Dr Strangelove said:
In that case risk is pretty tolerable.

I had misread your OP as suggesting loan balance was in or around the €335k.


I don’t want to be semantic but you are. Enforcing secured debt on Irish residential property is very hard no matter how solid your contract is. If their family member doesn’t want to repay you when they leave the house you are looking at expensive and protracted legal proceedings while they are alive.


It seems like a strange retirement profile to be reliant on when the owner vacates the house which could span a range of decades.
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Well they can't sell the house as I would be the mortgage holder so even if they live on in a nursing home that is also okay by me.

I am okay of this pays out in 30 years from now at which time the borrower will be in their late 90s as it ties in perfectly with my own pension as I am in early 40's now, in fact I am very happy the longer it goes on ( personally as they will still be alive, So even if they want to keep the house and be in a nursing home I am financially happy as I am getting a 6.5% compounding return). As I said this represents sub 5% of my present pension pot and the pension pot is still growing by more than 6.5% so the % of the pot will get smaller for the next 5 years at least. So I am far from reliant on this investment paying out. For me this is something for the tail end of my pension if I live on to my 90s. If te borrower lives on until I am 90 they would be the oldest Irish person ever
 
It's an excellent idea.

The problem would be the same problem as Spry and Bank of Ireland faces. People are happy to borrow money, but their children sometimes don't want to repay it 20 years later as they think that the house is theirs and didn't know that their mother had borrowed the money.

If you lend her €100k at 6.5% for 20 years, €350k will be coming out of the estate. The likes of Joe Duffy cannot understand how €100k can become €350k over 20 years - especially if the house declines in value over that period.

So a child might well move into the house and refuse to leave it. You will get them out but it will take a few years and a fair bit of legal fees.

So I would insist that the person discusses this with their children so that they are fully aware of it.

Brendan
 
Thanks, a good idea. I think I have it covered off as the borrower is childless and it was why I suggested Spry to them because they may as well enjoy extra money whilst alive than leave it to a cousins child etc.

I am also asking that all my own and the borrowers siblings sign the document as a witness and the document has a table showing the exact size of the debt at every year from now to the next 50 years. I want as few possibilities as possible with anyone disputing a will or trying to say that I did them out of their inheritance or not knowing I did this loan or that I co-erced the borrower etc.
 
DannyBoyD said:
Not to speculate on house prices; this could be a factor, but there's risks with any investment.

Long term however, I wouldn't see it as a dealbreaker.
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There is so much equity in the house that it will take 25 years for the deal to be in negative equity. If house prices are lower in 25 years than present level then we have a lot more to worry about than house prices.

Average house price in Dublin now is pretty much double double what is was in 2000.


I am very happy with the investment side of this on a macro level. I am more concerned with the micro side of this as it is the first time to do something like this.

So I guess the only way to sure this up legally is a solicitor. If anyone has any thoughts on a Dublin based solicitor who might specialise in this sort of law it would be most welcome
 
How much said:
If anyone has any thoughts on a Dublin based solicitor who might specialise in this sort of law it would be most welcome
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It's a standard mortgage.

Any solicitor should be able to draw it up for you. No need for a specialist who would be more expensive.

The law is important, but making sure that her beneficiaries won't be surprised and antagonistic in 20 years is much more important.

Brendan
 
Brendan Burgess said:
It's a standard mortgage.

Any solicitor should be able to draw it up for you. No need for a specialist who would be more expensive.

The law is important, but making sure that her beneficiaries won't be surprised and antagonistic in 20 years is much more important.

Brendan
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Especially her new spouse.
 
losttheplot said:
Would you need to insist on house insurance or could you take out the policy.
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Good point...It is effectively my house that could go on fire. Although the land value should still cover the debt owing to me for at least 10 yeas. The borrower has way more to lose if it goes up on fire....but either way a good point I hadn't considered
 
Yes----I think I should include that I take insurance and the borrower pays the annual premium with a right to shop around for cheaper cover
 
A friend once bought a property from a childless uncle, who maintained a right to life in the property. The uncle acted as the banker. My friend paid the 10% deposit and arranged monthly payments to cover the loan over a ten year period. In case of the uncle's death, the monthly payments were to be paid into the estate. The agreement was drawn up and tightly worded by a solicitor. Upon the uncle's death, his relatives came out of the woodwork, a number under the impression the house would be left to them. The uncle had not mentioned he had sold the house. The relatives put tremendous pressure on him to sell the house as they did not want to wait until the loan was repaid for their inheritance. It caused tremendous tension in his family and some continue to carry a resentment about it years later. In hindsight, my friend maintained while financially it was a good arrangement, the emotional price by the split in family relationships was high.
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How much said:
A family member is about to avail of a lifetime mortgage from Spry Finance. In short that type of return on investment would suit my retirement savings profile so I am happy to lend to them on same T&C as Spry. (6.5% compounded monthly) and they only re-pay the debt when they cease to live in the house.

The borrower will get a slightly cheaper deal as I won't charge arrangement fees etc and have agreed no early repayment charges etc. I can also provide the funds quicker than Spry and that is an issue for the borrower

I have covered off the CA tax implications as the loan balance is below 335k (and will be for 25 years even when compounded up).

Is there anything else that people can think to be aware of?

In particular I will want the charge/mortgage to be registered against the property, can anybody recommend a cost effective way of doing that?
Click to expand...

Great Idea. I assume if its not one's business then you don't need to be regulated?

Just a couple of thoughts having been through the Spry process myself. They offer a "No Negative Equity Guarantee", would you offer that to the family member? So if the loan was more than the value of the house in 20 years time who covers the shortfall?

Something also to consider would be, if the person needed to go into a nursing home in the future would you consent to the HSE having a charge on the property also? or if the loan was of such a value that it maybe caused an issue with the HSE, if might be a bit of an issue with the family? I know there would be signed legal agreements, but eat bread soon forgotten and all that...!
 
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