Mortgage VS Secured Loan

jaskew

My father in law wants to buy my partner and I a house. He already has a fully paid house worth around 160K, he said he either wants to take out a new mortgage on a property for us (he is 62) or get a secured loan on his own house to raise money to buy another property.

There are several things I hoped you may be able to help with:

Will he get a mortage at 62 years of age, and could we inherit the house (along with the mortgage) if he were to pass away?

If he gets a secured loan, can he transfer the debt from his own house to the new house he buys (so his own house is no longer at risk)

Has anyone had similar dealings to this or knows how this may possibly work?

Many Thanks!!

Richard_Webster

Mortgages are the security for loans. In practice therefore mortgages and secured loans are the same thing.

maninthestreet

What is your FIL's current gross annual income? When he retires, what will his gross annual income then be? Who will actually own the house?

BitterAndTwisted

Why can't you get your own mortgage rather than your FIL putting his own home at risk? If he intends to charge you rent he needs to be aware of the tax-implications on that income and you need to be aware of the risks of what could be deemed a "contrived tenancy" should you need to apply for help with the rent at some point in the future.

jaskew

We have looked at mortgages on our own but unless we put 25% down the rates are too high, my father in law wants to buy us the house and not charge rent as his intentions are that when he passes we'll inherit the new house and the house he already owns will be split 50-50 between my partner and her brother. At a glance, I've worked out that the cost of an unsecured loan over 20 years would work out much cheaper than a mortage, and we'd intend to simply transfer the ownership and remaining debt of the loan to ourselves if her father dies before its paid back. Is this a possibility and is this a sensible way to move forward?

CloudCuckooLand

You haven't answered whether FIL has income to support a mortgage...

Why not just ask FIL to give you 25%, as a gift, then get a mortgage for 75% - no messy transfer or "what happens in event of death" issues...less borrowed against his place means your partner's 50% is bigger, so you get it in the long run?

Not sure you have compared like with like to decide that unsecured is cheaper than a mortgage. Could you get a large enough unsecured loan to buy a house anyway?

If FIL borrows a large amount against his own place, then dies, there might not be much left for the brother to get - you need to be careful about causing jealousy over money where family are concerned - a fued is the last thing you want to create.

FIL will need a will that covers what you end up doing, in detail, to avoid tax implications and inadvertent consequences.

Simplest option involving FIL heavily, if he has sufficient income, would be for him to get a mortgage on a new place directly. Rather than risk his own home, where he will want to retire quietly to...

Tiddlywinks

Your FIL is only 62! Why all the talk of death? How is his health? What if he needs care in the future? Is taking on more debt a good idea for him (or anyone) and will it increase his stress levels?

As others have said, will his income support the additional borrowing? Could he just lend you the 25%?

I also agree that your GF's brother may feel that she has been given more than him and this may cause ill feeling.

To be blunt, I think you are only looking for the positive responses because there is something in it for you - you need to start thinking of your FIL, his wellbeing and peace of mind. He may want to help BUT should you accept the offer and put his financial security at risk as a result?

CLAPTON

jaskew wrote: »

We have looked at mortgages on our own but unless we put 25% down the rates are too high, my father in law wants to buy us the house and not charge rent as his intentions are that when he passes we'll inherit the new house and the house he already owns will be split 50-50 between my partner and her brother. At a glance, I've worked out that the cost of an unsecured loan over 20 years would work out much cheaper than a mortage, and we'd intend to simply transfer the ownership and remaining debt of the loan to ourselves if her father dies before its paid back. Is this a possibility and is this a sensible way to move forward?

it's unlikely that an unsecured loan would be cheaper than amortgage even if you could get one