Securing €35k loan on inheritance?

D

DrPhilG

Guest
I will be borrowing approximately €35,000 shortly to pay for wedding, honeymoon and some home improvements.

Firstly, I have calculated that I will be able to pay off the full amount within about a year, year and a half for reasons that will become clear later, so please don't give me a lecture about borrowing money etc. I've had it all before on these forums. I appreciate genuine concern about silly borrowing but some people are just plain rude.

The reasons I expect to pay it off early are 1, I have 200 guests coming to the wedding and we have asked for cash as gifts as we have everything we need. Even at €50 a head, (and most weddings I've been to lately, €100 a head was the norm) we'd bring in roughly €10,000 in gifts. Secondly I am also expecting an inheritance to clear some time soon which will give me about €10,000 cash, maybe a little more. Therefore I will be well able to pay off the loan.

Now on to the main question, I would obviosuly assume that the bank would want some security on this size of a loan. I've heard it said by others here that even if the inheritance hasn't cleared yet, the bank should accept a solicitor's letter as security, provided it states the size of the inheritance and roughly how long it should take to be processed.

The inheritance gives me a 50 acre farm as well as the cash amount so it should easily be OK for security on a €35k loan. Agricultural relief should take care of any big nasty tax bills.

Has anyone had experience of this, and if so, what exactly do I need? A copy of the will, or a solicitor's letter. If I need the letter, what exactly do I need them to state on it and how long do solicitors usually take to do it.
 
Depends on how much security the bank will require. Will they require a charge over the farmland or just for you to repay the 10k, the rest as a normal personal loan (unsecured).

The solicitor handling the estate could give an undertaking to give the bank the 10k when probate is complete ( subject to the usual conditions re tax, debts and costs being deducted where appropriate).

But if the bank want a legal charge then they have to send a legal pack to the solicitor. The solicitor might or might not give an undertaking on this if probate is not yet granted.
 

Sorry for being dumb but I don't understand most of that!

I want to borrow the €35k from the bank, with them taking the impending farm as security. Basically the bank will probably not lend me a penny without security because I work in the UK, hence my income doesn't come directly into my bank account so they will not recognise it. They have refused me a €1000 overdraft in the past!

I wasn't looking to write the handing over of the €10,000 inheritance into the terms of the repayment if that's what you mean, I would just want the loan to be flexible, i.e. when I get a lump sum from wedding gifts, cash inheritance or anything else, I can just pay a chunk off the loan.
 
Sorry, wasn't trying to confuse.

Okay, so you want a loan. The bank want to be sure you will repay. The bank want security.

There are two possibilities here:

1. You are due to inherit approximately 10,000 in a cash lump sum. The solicitor who is handling the estate could give the bank a letter undertaking that when the estate is finalised and due to be distributed that they will pay that 10,000 to the bank as part payment of your loan. This is called a letter of undertaking. You would have to ask the solicitors if they will do this for you and give them an authority in writing to do so if they do agree.

2. The bank want a legal charge or mortgage over the property. How this is done ( because you don't yet own the property) is that they send your solicitor charge documents for you to sign, and the solicitor undertakes to the bank that once the estate is finalised they will go ahead and register the charge over your property. If you take out a variable interest rate loan then there is nothing to stop you paying lump sums off the amount when you like.


Some solicitors ( myself included) might be hesitant about giving an unconditional undertaking in the circumstances where a grant has not issued and would make both undertakings conditional on- being retained to extract the grant, amount to be paid would have to be net of taxes, legal fees and possible government deductions or repayments etc etc. You should contact both the bank and the solicitor for the estate and talk it through. Remember that because the charge is over farmland you will only qualify for a commercial loan rate too which can be quite high. I would recommend you shop around, in particular Ulster Bank, NIB and ACC.
 
Starting to get you now.

So would I just be better to go speak nicely to the credit union? I have about €13,000 in there at the minute and they may take notice of the fact that I have an inheritance on the way without complicating matters.
 
DrPhilG said:
Starting to get you now.

So would I just be better to go speak nicely to the credit union? I have about €13,000 in there at the minute and they may take notice of the fact that I have an inheritance on the way without complicating matters.
Click to expand...

Crunch the numbers. Particularly if the bank require a charge over the property you will have to pay at least 1000 to 1400 in fees alone so if the CU loan is even vaguely competitive you could well be better off.
 
Thanks, I'll have a word with the credit union on Saturday.
 
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