Parent offer to lend money to pay off mortgage

Becke_2

Hi there. Just wanted advice on the legalities of this. My mum has retired and got her lump sum. She's offered to lend us the money to pay off our mortgage. Basically shed give us the cash then we'd pay her back a set amount per month.

Obviously this would be great as we've £90,000 left to pay over 24 years - we'd save loads in interest. But wondering the legalities and tax implications????

Thanks in advance for any advice

beck x

CloudCuckooLand

A wonderful nightmare. (Deliberate contradiction in terms!)

If she dies within 7 years the taxman will want some back.

If she suffers a stroke and has to go into council care, the council might view it as deprivation of assets.

If the timing is unlucky, and you need benefits at the point of receiving the lump sum, you will appear to not qualify for certain benefits due to having in excess of £16k in the bank. It then disappearing from your account, could look dodgy to the benefit people...it might not, but could need explaining, at least.

The loads of interest you save, is interest she could nearly be earning on the lump sum. She's allowed to gift a total of £3k a year to relatives, so she could tie it up in decent 5yr fixed savings accounts/ISAs that get close to your mortgage rate, then gift you the equivalent of the monthly payments, for example. Top it up with "birthday" and "xmas" cheques, if need be.

Reverse of what you've suggested, but without the other complications.

But thats just a range of thoughts off the top of my head while watching Tim Robbins doing financial shenanigans at Shawshank !

This needs sitting down and looking at the overall situation of her estate and potential future legacy, your own income/benefit situation, etc, imo.

dimbo61

You have another option !
How about an offset mortgage
Check out Yorkshire Building Society friends and family
You take out an offset mortgage and mum puts money into Her offset account saving you interest each month.
Then as you pay the mortgage payment each month Mum takes the same amount out and either invests it in Cash Isa,s or regular savers or spends it.
The Money is under mums control and is her money so just in case you and the OH split up she can take her money out of her account.
You will pay no interest on your mortgage and therefore pay it off much quicker
just an idea

CLAPTON

If it's a loan and she expects no interest, then there are no tax implications.
As it's a loan there are no IHT consdierations as no gift is involved.

You need to consider what would happen if she died.. would her estate want the loan repaid immediately or as per your agreement with her?

and what if you died? .. what is your situation?

Thrugelmir

dimbo61 wrote: »

You have another option !
How about an offset mortgage
Check out Yorkshire Building Society friends and family
You take out an offset mortgage and mum puts money into Her offset account saving you interest each month.
Then as you pay the mortgage payment each month Mum takes the same amount out and either invests it in Cash Isa,s or regular savers or spends it.
The Money is under mums control and is her money so just in case you and the OH split up she can take her money out of her account.
You will pay no interest on your mortgage and therefore pay it off much quicker
just an idea

Good idea. Very simple and straightforward. As avoids neccessity and expense of drafting legal agreement.

TighterThanTwoCoatsOfPain

^^ Would that work?

<With my offset you can only link accounts which have a name on the mortgage..

Thrugelmir

TighterThanTwoCoatsOfPain wrote: »

^^ Would that work?

<With my offset you can only link accounts which have a name on the mortgage..

With YBS up to 3 savings accounts can be linked to the mortgage account. As Dimbo says the money deposited remains under the control of the saver. Avoiding any complexity.

dimbo61

works for me !
Would protect the OP,s mum and save all that interest
mum could still gift £3000 a year and drip fed an ISA or RS each month.
You can offset the full mortgage balance with YBS

dimbo61

The poster and her OH need life assurance no matter what her mum does.
If mum dies the money in the offset is taken from her offset account and paid to her estate