Joint borrowers - What needs to be considered as part/as well as the Equity Release?

It is a regular occurrence to receive a joint application for equity release only to find that the deeds are in the sole name of one borrower (admittedly, it is readily accepted that the equity release can generally only proceed if the deeds are in joint names in the scenario of joint occupation - unless, of course, the partner/spouse does not qualify).

So, when adding a borrower on to the deeds what needs to be considered?

1. How do the borrowers wish to own the property - joint tenants (so the survivor ultimately inherits the whole of the property following the first death) or tenants in common (so their respective shares of the property pass in accordance with their Wills)? If tenants in common, what is the ownership split going to be (lenders will accept a 99/1% split)?

The above sounds simple (ish) so far. However, if the borrowers own as tenants in common this then leads on to important discussions regarding Wills and should also lead on to a discussion about access to the reserve/drawdown facility following first death (don't forget, certain lenders will not permit the drawdown to be accessed if the surviving spouse is not the outright owner of the property).

Irrespective of joint tenants/tenants in common, if a borrower is being added on to the deeds and taking even 1% ownership, this is so important that the "original property owning borrower" should speak with their family, to discuss this with them and to let them know what they have done (admittedly if it is a joint family it is less of an issue).

2. Tax - Even though we are talking about the borrower's main residence, it is always wise to watch out for a potential Stamp Duty tax liability if the deeds are being transferred, especially if there is a large existing mortgage on the deeds. Any liability of course depends on the size of the existing mortgage and the percentage the borrower is transferring. If a third party (family member, for example) is coming off the deeds we also need to consider if there is any Capital Gains Tax to pay if the third party who was on the deeds did not/does not live in the property.

3. It is also always sensible, but especially so if joint borrowers with a cash facility, for the borrowers to prepare Lasting Powers of Attorney to ensure that if either loses their physical or mental capacity that someone (other than the co-borrower) is appointed to sign to draw funds from the cash facility if needed.

4. Also important to consider, however delicate a subject, is the issue of debts. It is occasionally the case that the reason that the deeds are in the sole name of one of the borrowers because of the indebtedness of the other borrower. It can often be a concern for that borrower to be added on so this may need to be discussed (and indeed in those circumstances their ownership limited to 1%).

For something which seems as simple as adding a borrower to the deeds, there are many different issues to consider, and the above are just a few of them. If you have any queries on transfers please do let me know.

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