Bit of an odd situation advice needed please

earnitspendit

My mother owns her property outright, she wants to borrow some money against it to make some home improvements and pay off some debt. She isnt in a position to afford the repayments but my husband and I are, and are prepared to do this for her. What is the best way of borrowing the money, its a large sum so a personal loan is out of the question, I am hoping someone here can direct me as your advice is always so helpful, TIA

Rafter

You have a choice.

Either one of you needs to take out a joint mortgage of some kind with her, or she can take out an 'equity release' mortgage.

With the first, you will have to make payments and the house could be repossessed if you cannot keep up payments.

With the second, you never make any payments and the interest is added to the loan and only paid off when your mother moves into long term care or dies.

The interest bill on an equity release mortgage will be a bit higher potentially, but then you and your husband won't be having to make payments now, you will just inherit less in the future when the house is eventually sold.

An independent financial advisor with experience of equity release should be able to help you do some sums and work out what is the best option for all 3 of you.

Good luck

R.

earnitspendit

Thanks - I did look at equity release but as she isnt 60 yet it seems an expensive option my husband and I are happy to make the repayments.

Thanks again

Rafter

a small mortgage seems to be the best option then. I would suggest interest only.

Make sure you have a written agreement in place and maybe have a word with someone about structuring it like an equity release mortgage for you and your husband. That way if your mother ever needs long term care, the full value of her house won't be taken into consideration when the loan and the interest you have paid is taken into account.

Good luck

R.

Pee

You do want to make sure any agreement is very clear. Does she have any other children or expectant beneficiaries? If so you should consider whether it is best that they know about this now, as knowing in advance usually makes it easier for people to accept and understand.

hoggums

And what if you and your husband lose your jobs, he runs off with another woman or some other unforseen circumstance and you can't meet the repayments- your mother will lose her house through no fault of her own.

Get her to think carefully about the risks before she and you agree to this.

earnitspendit

Thanks for all your advice - we will consider all the things mentioned, it is unlikely my husband will lose his job, and if he ran off with another woman I could afford the repayments on my own. We are not stretching ourselves to do this. There are no other children to be considered in this arrangement either, the house will ultimately come to me.

Pee

Then make sure there is an agreement in place in case she needs nursing care. I would make sure that you can prove a payment from your account into her account, and from there that it was used to pay debts and did not come back to you.

CHR15

It may be better to have only you taking this on in your sole name if the repayments are affordable to you.

If it all goes sour, no-one else will have claim on the house etc. only you. Things can get messy very quickly.

earnitspendit

Thanks everyone we are going to see a financial advisor to make sure everything is done properley and if any legal stuff needs doing we can sort that out too, but thanks for all your advice.