Second Charge on a Property

Through an inheritance our daughter has sufficient money for a 60% deposit on a house. She has recently married and we are keen to protect her contribution as well as we can and have started to consider setting up a Trust Fund and having the fund loan her the money toward a new house.
How will Mortgage Providers react to this. I understand it will be termed a "second charge" on the property.
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Is this from your daughter's inheritance. If she creates a trust that is actually effective, I believe it will be a gift 'with reservation of benefit', which has interesting inheritance tax implications. Maybe she could arrange a deed of variation on the original will so that she never actually receives the money. Even then it may be subject to some inheritance tax. I suspect a useful trust would not be allowable for PETs, so there could be lifetime tax charges. At least the impression I get on a short bit of research is that the taxation situation is very difficult to understand.
I assume the loan would have to be secured for that, but, if not secured, I imagine the scheme could be easily defeated. I'd guess the difficulty might be in ensuring it really was a second charge, so the provider had first call when they foreclosed, even though it would actually have to be made simultaneously.
I wonder if a simple tenants in common arrangement could achieve the aims of the arrangement.
If the inheritance is your daughter's, won't the husband see such arrangements a large vote of no confidence.
Generally, I see so many pitfalls, that I don't think you should be relying on non-lawyers on newsgroups to validate your solution.
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David Woolley
We are dealing with a Lawyer on setting up the trust. The next step is for her and her husband to get a mortgage offer for the 40%. I want to find if this is likely to hit any snags.
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First, even - since it'd be a charge related to 60% of the value of the property, versus their 40% interest.
But there's another angle... Your daughter - herself - has inherited this money? If so, then it's her money. She can set up a trust, donate all the money to it, then get the trust to loan it her back - but you can't do anything of the kind, since it's not your money.
By doing so, she'd effectively be saying to her new husband "No, I don't trust you in the slightest and am already thinking the marriage was a mistake that won't last long". Sounds like a self-fulfilling prophecy to me...
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Adrian wrote in news:leka1g$v6e$2
The money was actually left to her mother - but the underlying intention (will not completed) was that the daughter would benefit. Legally - the money is currently her mother's money.
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Slightly confused here.
A second charge is normally to secure a loan so that if/when the property is sold the loan can be repaid out of the proceeds of the sale.
The mortgage company will normally, of course, insist on first charge because that is what the CML handbook states.
So if you are lending your daughter the deposit on the house but you wish to retain control of the money and perhaps have it paid back over a period or when the house is sold then this seems a reasonable way of securing the loan against equity in the house.
It also keeps it separate from the married couple so that if they do split it should not be part of any settlement.
The part about the trust - are you giving her money in trust so that she can effectively have the use of it but not own the capital?
Is the intention that the trust will then lend the money to her (and perhaps to her husband?) to use as a deposit on the house?
Or will the trust buy 60% of the house and rent it to the happy couple? That is, will the trust wish to share in any increase in the equity over time?
Anyway, you need the agreement of the first charge holder (who will be the mortgage company) for you to take second charge.
If they do not agree to this you can still register an equitable charge by way of a note which records that you have an interest in the property but does not carry the same rights to sell the property to recover any outstanding debts.
Please note IANAL and my terminology is not necessarily the correct 'legal speak' where some words have very specific meanings.
Dave R
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All completed - We had the agreement of the Building Society and have a Deep of Postponement in their favour.
The Trust Fund is Loaning the money - but we will not want it repaying unless the house gets sold due to a divorce.
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