• Insolvency Indemnity

    By Guest on 15th Dec 2016

    I am in the process of remortgaging and I wish to put my new wife jointly on the title deeds of our home. The lender has said that I need to take out insolvency indemnity insurance. Although I am gifting my wife half the property my name is still on the other half. Can someone please explain.

  • 1 Answers

    By Guest on 21/12/2016

    You are giving away half of the equity in your property. People will sometimes give away assets or parts of assets if they are about to become insolvent in the belief that by giving something to a close friend or family member (in this case half of the equity in the house) their creditors will not be able to make a claim on it. In fact insolvency law allows the trustee in bankruptcy to overturn a transaction if it appears that the purpose of the transaction was to put an asset beyond the reach of the bankrupt's creditors. He can do so up to 5 years after the transaction took place.

    The risk to your lender therefore is that if you became bankrupt after taking out the new mortgage the trustee may overturn the transfer which would mean that as well as your wife losing her half of the equity the lender would lose its charge. That is what the indemnity insurance is for.

    It does not mean that anyone is suspicious about your motives for the transfer, they simply need to cover all eventualities.

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