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Applying for mortgage - granny flat

  • 19-05-2016 9:58pm
    #1
    necstandards
    Registered Users Posts: 188 ✭✭


    Hi

    Partner and i wish to purchase my partners home house from their mother and build a granny flat for her. We want to try ensure that she will always be able to stay there, trying to cover all eventualities.

    In our mortgage application, how can we ensure that if we default on the mortgage for example, that the house will not be taken from her. Is there a mechanism to cover a situation like this?


Comments

  • #2
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,421 Mod ✭✭✭✭Gumbo


    necstandards wrote: »
    Hi

    Partner and i wish to purchase my partners home house from their mother and build a granny flat for her. We want to try ensure that she will always be able to stay there, trying to cover all eventualities.

    In our mortgage application, how can we ensure that if we default on the mortgage for example, that the house will not be taken from her. Is there a mechanism to cover a situation like this?

    No, because the granny flat is an extension to the main dwelling and has to be connected to the house, bot structurally and from an internal arrangement too.

    This means the that granny flat is part of the main house and it can revert back to been part of the main house after the "granny flat" use is no longer required.


  • #3
    simdan
    Closed Accounts Posts: 577 ✭✭✭simdan


    Why would you even think of default before even applying for a mortgage? Surely that's over thinking things a little..


  • #4
    pc7
    Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 13,981 Mod ✭✭✭✭pc7


    My family did this and they had to have separate solicitors to ensure my gran wasn't being forced into anything, also agreed legally that she had a life times interest in the property. (not sure how mortgage default would have affected this I'm sure it wouldn't have been worth the paper it was written on). She lived 25 years after the agreement and it was great for the rest of the family as my aunt took amazing care of her. It is something to think of, while it worked for my aunt it can be very difficult have a 'third' person in a relationship.


  • #5
    sammyh73
    Registered Users Posts: 2 ✭sammyh73


    Hi there, this is an old post I know but just wondered if you had any success in getting a mortgage for the granny flat with your Mother in Law having the right to reside. We are in a similar position but have been told we cannot get a mortgage because of this. Thanks :)


  • #6
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,421 Mod ✭✭✭✭Gumbo


    sammyh73 wrote: »
    Hi there, this is an old post I know but just wondered if you had any success in getting a mortgage for the granny flat with your Mother in Law having the right to reside. We are in a similar position but have been told we cannot get a mortgage because of this. Thanks :)

    Nobody can.
    A granny flat is an extension to the main dwelling. You cannot get a separate mortgage for a portion of a property.

    If the main house sells, the granny flat goes with it.
    If the main house owner defaults, the granny flat goes with it.


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  • #7
    antix80
    Registered Users Posts: 2,419 ✭✭✭antix80


    sammyh73 wrote: »
    Hi there, this is an old post I know but just wondered if you had any success in getting a mortgage for the granny flat with your Mother in Law having the right to reside. We are in a similar position but have been told we cannot get a mortgage because of this. Thanks :)

    Sincerely doubt banks would entertain this sort of nonsense.

    A mortgage is secured on the property meaning the house will be sold if you default on the loan. Who'd buy a house that came with an old woman in tow?

    The original poster's query is classic.. give an ould woman lots of money for her house, but she never has to vacate the property if she doesn't want to even if the loan is no longer paid and someone else owns it.


  • #8
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    sammyh73 wrote: »
    Hi there, this is an old post I know but just wondered if you had any success in getting a mortgage for the granny flat with your Mother in Law having the right to reside. We are in a similar position but have been told we cannot get a mortgage because of this. Thanks :)

    Not surprising to be blunt.

    Think about it from the banks perspective.

    They'll be loaning you a large chunk of money. You'll be offering the house as security.

    If you stop paying, the bank will (eventually) try to recoup their losses by selling the house.

    What's the house going to be worth if it comes with the benefit of a live-in granny?


  • #9
    soc
    Registered Users Posts: 488 ✭✭soc


    I actually saw a folio recently for a property that had a granny flat attached to it. There was a burden listed on the folio:
    "The rights and privileges specified in Instrument No XXXXXX in favour of YYYYYY during his lifetime"

    So it is possible, but something you would need to discuss with solicitor and bank


  • #10
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    If you own a property outright, I don't think you'd have any problem granting a lifetime interest. The problem here is the mortgage (security).

    It's not unheard of for a will to grant one person a lifetime tenancy while passing ownership to another person.


  • #11
    soc
    Registered Users Posts: 488 ✭✭soc


    Graham wrote: »
    If you own a property outright, I don't think you'd have any problem granting a lifetime interest. The problem here is the mortgage (security).

    It's not unheard of for a will to grant one person a lifetime tenancy while passing ownership to another person.

    FYI bank had interest on the folio dated after the burden for granny flat was on the folio. So there was a mortgage on the property after that burden for lifetime access was put on. Elderly person sold house to child with this burden on it.


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  • #12
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    soc wrote: »
    FYI bank had interest on the folio dated after the burden for granny flat was on the folio. So there was a mortgage on the property after that burden for lifetime access was put on

    Interesting. Do you know if the burden was a mortgage or some other type of charge that had been placed against the property?

    I think you'd find it very tough going to find a bank willing to do that now.

    I guess if the LTV were small enough you might persuade one of the specialist lenders.


  • #13
    soc
    Registered Users Posts: 488 ✭✭soc


    Graham wrote: »
    Interesting. Do you know if the burden was a mortgage or some other type of charge that had been placed against the property?

    I think you'd find it very tough going to find a bank willing to do that now.

    I guess if the LTV were small enough you might persuade one of the specialist lenders.

    Yes that's why I say it is possible but you would need to discuss with your solicitor and the bank.

    Perhaps age of the person going in the granny flat and being listed on the folio would be factored in? ie if granny was a spritely 40year old the chances of default on mortgage during her life before her old age death would be high while if granny was 80...chances of defaulting on the mortgage before her death would be lower? I have no idea how they got it...but it shows it is possible


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