Putting a piece of property in a family trust isn’t just about the present. You’re thinking about the future. Trusts can keep your money safe, help you with taxes, and make it easier to give property to someone else. What do you do if you need to get a mortgage on a house that is in trust? Is it still possible to get a loan? Who has to pay it back? Let’s go over the rules in this blog because they can be hard to understand.
What is a Family Trust?
A family trust is a legal agreement in which a group of people (trustees) hold money or property for the benefit of another person (beneficiaries). People usually use family trusts to:
- Keep family property safe for generations.
- Lower inheritance tax.
- Avoid probate delays.
- Manage property for children or elderly members of the family.
There are many different kinds of trusts, but life interest trusts and discretionary trusts are the ones that people use most often for property.
Can a Family Trust Own a Property?
In the UK, a trust can own property legally. In this case, no one person owns the property. It is in the name of the trustees for the benefit of the trust. The title deed will have the names of the trustees, not the people who will benefit.
This structure can help keep the property safe from some taxes, claims, or money problems that may come up in the future. But having property in a trust might make it harder to get a mortgage.
Can You Get a Mortgage on a Trust-Owned Property?
It is possible to get a mortgage on a property that is held in trust, but it is not as easy as getting a regular residential mortgage. Most lenders have strict rules about property owned by a trust.
What lenders look for on a trust property mortgage
- Some banks won’t lend at all: Some banks on the high street won’t give you a mortgage if the property is already in trust. You might have to go to a lender who specialises in this.
- The trust deed must allow borrowing: There needs to be specific terms in the trust document that let the trustees borrow money. You can’t borrow if it doesn’t.
- The trustees are the borrowers: The trustees will be the ones who hold the mortgage, and they are responsible for the repayments.
- You might need to give personal guarantees: In most cases, the lender will want the trustees to give personal guarantees. If the trust can’t pay, the trustees have to take the money out of their own pockets.
When Is a Mortgage Most Common with a Trust?
People often need a mortgage on a property held in a trust in the following situations:
- Buying a new property and putting it into a trust right away.
- Getting money out of a property that is already in a trust.
- Getting better mortgage terms by refinancing between lenders.
- Paying inheritance tax when someone dies.
You need to talk to a mortgage broker who knows how trusts work in each of these cases.
Why lenders see trust property as higher risk
The one thing that lenders are most worried about is risk. When a home is held in trust, they are less certain they can get it back if the loan isn’t paid. This is why it is always a good idea to check the numbers first with a UK buy-to-let mortgage calculator.
Mortgage lenders want to be sure of the following:
- The mortgage can be paid.
- The trustees have the money to do so.
- The trust terms allow for the loan.
Some lenders want a copy of the entire trust deed. A lawyer may also give them written opinions or legal advice letters. This is to make sure that the trust structure doesn’t stop them from getting their money back.
Advantages of Using a Trust with a Mortgage
There are distinct benefits, but only if you set things up correctly from the start. Some of the possible benefits are:
- You can keep the property safe from care fees or future court action.
- You can reduce inheritance tax by placing property in a trust.
- You can decide when and how the property is given to family members.
- If the trust deed allows it, you can keep using the property as collateral for a loan.
These benefits only apply if you are careful to follow all the rules and check what the trust can realistically afford to borrow using our guide to mortgage affordability in the UK. If you make a mistake, you could be denied a loan or have to deal with legal problems later.
Things to Do Before You Apply for a Mortgage
If your home is already in a family trust or you want to put it in one and borrow money at the same time, here is what you need to do:
- Look over the trust deed: Check to see if it lets you borrow money and make mortgage deals.
- Talk to a solicitor: You need to get good legal advice so you don’t have problems later on.
- Pick a mortgage broker: Use UK mortgage brokers who know how to work with properties owned by trusts.
- Get your paperwork ready: Make sure you have all the trust papers you need, such as the deed and trustee information.
- Be totally honest with the lender: Don’t let them think that the house is not in a trust. It might stop or delay your loan.
How a whole-of-market broker helps
Every family situation is different, and we can help you get a mortgage if you need one on a property owned by a trust. As a whole-of-market mortgage broker we work with all lenders, so we can find the ones who are experts in these kinds of situations and help you through the whole process, whether it’s advice, comparing loans, or filling out forms.
Conclusion
You can get a loan on a property that is in a family trust, but it’s not easy. The terms are harder to understand than a regular mortgage, so you should get help from a professional if you want to do it right.
Make sure that the trust deed lets you borrow money, that the trustees are ready to make an application, and that you have the right lawyer and broker. When used correctly, a trust can help your loved ones stay financially stable for a long time while still letting you borrow money when you need it.
Speak to a trust-owned property mortgage specialist
Trust-owned property is one of the cases where the high street usually says no and a specialist lender says yes, provided the trust deed, the trustees’ finances and the paperwork are lined up before the application goes in. We deal with these cases regularly: we read the deed with you, match you to lenders who accept trustee borrowers, and manage the solicitor’s letters and guarantees so the application isn’t held up. Whether you are buying into a trust, raising money on a property already held in one, or refinancing to settle an inheritance tax bill, we can tell you quickly what is possible and on what terms.
UK Mortgage Broker is a whole-of-market broker helping clients throughout the UK and globally to secure funding on UK property. We are directly authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Call: +44 1628 969 500 Email: info@uk-mortgagebroker.co.uk
Related Pages
- Buy-to-Let Mortgages – Lending criteria, deposits and rental cover for investment property, including property held through trusts and companies.
- Complex Income Mortgages – How lenders assess trustees, directors and anyone whose income doesn’t fit the standard payslip model.
- Remortgage – Raising capital or switching lenders on a property you already own, including one held in trust.
- How Brokers Place Difficult-to-Place Mortgage Applications – What actually happens behind the scenes when a case falls outside high-street criteria.
- How CGT Changes Are Reshaping Buy-to-Let Refinancing – Tax-driven reasons to restructure how a property is owned and financed.
My husband and myself have a property in a trust. We wish to move to a larger property with our daughter and her family.is it possible for her to get a small mortgage or us to make up the difference in price we are retired.