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Where Taxpayers and Advisers Meet

Children As Mortgagees Under a Bare Trust?

ricoops
Posts:1
Joined:Thu Mar 11, 2021 7:19 pm
Children As Mortgagees Under a Bare Trust?

Postby ricoops » Thu Mar 11, 2021 7:43 pm

My late father gifted money to my three children who are still all under the age of 18. I am the trustee of the building society accounts where the money is saved. My ex-wife/the childrens’ mother wants to buy a flat to rent out. Instead of her mortgaging the property with a bank/building society, I wondered if it was feasible that the three children jointly lend the money as mortgagees for the property using a bare trust? The childrens’ combined savings are sufficient to cover the borrowing requirement on the property. The mortgage would follow standard market terms (basically copied from an appropriate product) and interest rate, i.e. the children would receive a much better rate of interest than they are currently getting on their savings, with a charge against the property as security.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Children As Mortgagees Under a Bare Trust?

Postby maths » Thu Mar 11, 2021 9:19 pm

No. As trustee you have to act exclusively in the best interests of the minor beneficiaries.

Using their monies to grant a loan even to their mother would be unacceptable even if on market terms.

A buy to let is a risky investment; there may be periods during which no rents are received; property values go up and down and there could be circumstances under which the market value of the property falls below the outstanding loan.


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