Paying £20k interest only mortgage off with a loan

(Long Post)

I have recently found this site and have used it to sort out mine and my family's finances.

Currently I am looking at my mum’s mortgage. She has an endowment mortgage which she has successfully claimed back some money through being miss-sold it (with help from this site!). She has however kept the policy as she has been under long term sickness therefore was unlikely to get a mortgage elsewhere since she is unemployed now. She is currently receiving incapacity benefit, and is unlikely to be able to return to work full time due to her medical problems. Her condition is likely to get worse sooner or later that’s why the endowment policy has been kept as one of her illness is listed in the policy for payout but she is at a very early stage but is likely to reach it within the policy period so it seemed best to continue it.

Her house has a mortgage on it and it's worth around £120k to £140k and the mortgage (interest only) is £20k that she owes.

Currently her mortgage is with Abbey National and she is being charged 7% and with interest rates going up this will go beyond 7% soon enough. With a projected £5k shortfall in the endowment policy I think paying interest only is throwing money away.

My brother and I have been considering taking out a loan to pay off our mums mortgage and for us to make the payments in addition to what my mum is paying now (around £140-£150 p/m) on her interest only aspect. My brother will be fully qualified come July and will be earning at least £23k (very likely to get a job straight away) and I am currently earning £25k, both of whom should move up in salary as the years pass. So we can afford to pay money to pay the mortgage off while still continuing to save ourselves. So we believe we should be able to pay £300 to £500 a p/m

Would getting a secured loan in all 3 of our names be the best way forward or would it be better to just have it without my mums name on it since she's unemployed?

Anyone got any recommendations for the best place to get a loan for £20k on the best rates?

We do still need to look in to what effects paying off a mortgage would have in terms of my mums benefits since she'd be deemed to own the property out right so the benefits agency would think she'd have more income than she does. Hence the reason I think it would be best to have the loan in my mums name and have my brother and I as guarantors if possible, since we would still be contributing but the benefits agency would see that she still has a commitment to paying off £20k so won’t cut any of her benefit.

Any advice would be greatly appreciated as my mother isn’t very money wise and all this loans/mortgages stuff is new to me.

Also if anyone knows of ay calculators to work out how much per month would need to be paid at a set percentage over a particular period of time would also be great so that we can work out what term of loan is best as we’d like to pay off any loan as quickly as possible.

Thanks for any help