Mum's mortgage ended & she still owes £25k !!

Kev64

Hi,

Not sure what part for the forum to put this in, as it's a mixture of everything !

Basically, my widowed mother (80 this year) still owes £25k on her interest-only mortgage, on a house worth roughly £180k. That mortgage has now come to an end and the Building Society have written to ask how she intends to pay the outstanding amount. She, nor I, have any money to do this, thought we do have letters from the Building Society confirming she could extend the mortgage on the same interest-only basis until her death.

I, personally, have roughly £18k of credit card debt, and am living in a rented house (can't get on the housing ladder) and I had an idea that if I were able to get a mortgage for roughly £45k (£25k+£18k) on her house (she would happily sign it over to me), I could pay off her mortgage and my debt, and let her live there for however long she has left.

As long as the mortgage repayments did not exceed my existing credit card repayments, I could afford it - though I am 47 this year and I don't know what length term I could get on a mortgage.

I thought that another possible advantage would be that should my mother ever need residential care in the future, I'm led to believe that the local authority would not be able to sell her house in order to pay for it, as it would then be mine.

There are pro's and con's to all of this as I have discovered from an IFA on here (thankyou), as in - if my mum gives me the house and continues to live there, I would have to pay Capital Gains Tax when I eventually sold it, plus she could be liable for Inheritance Tax, and the property would still be included in the means test so it wouldn't be out of reach of the Local Authority should she end up in care.

Does anyone have any ideas on how best to juggle this ? - and, perhaps more importantly, who I ought to be discussing this with to make sure I do the right thing ? Would that be a Solicitor ? An Accountant ? A Mortgage Advisor ?

Never having got involved with this sort of stuff before, I'm not really sure where to turn.

Cheers !

milla

Inheritance tax will only be payable, on death , if the whole estate is worth above £325,000.

http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-thresholds-rates-and-who-pays/

CloudCuckooLand

You cannot get a £180k house for £45k and not expect the council/benefits/pension dept, etc, to come asking where the other £135k has disappeared to, I'm afraid.

Mum needs to get advice on protecting her "right to permanent residence", or "security of tenure".

Start with a solicitor.

Joint ownership may be an option. But that may depend on your credit history, and whether you stay with current lender or not.

If the Lender will let her have another IO mortgage until death, that could be simplest.

Kev64

Thanks for the advice.

CloudCuckooLand wrote: »

You cannot get a £180k house for £45k and not expect the council/benefits/pension dept, etc, to come asking where the other £135k has disappeared to, I'm afraid.

I don't quite get this ? - Why would the council / benefits / pension dept have any interest in what my mother does with her house ?

getmore4less

Can she afford interest only?

Is she can looks like the first step would be to arrange the open ended interest only mortgage that hs been offered.

Could you move in to help with the costs and reduce your outgoings to reduce your debt.


You taking over the house has loads off issues as allready pointed out.


Is the house actualy suitable long term might this be an opportunity to look for something more suitable and cheaper, get rid of the mortgage and some cahs to have some fun while she can.

CloudCuckooLand

Kev64 wrote: »

I don't quite get this ? - Why would the council / benefits / pension dept have any interest in what my mother does with her house ?

Google "deprivation of assets".

She cannot "give away" large chunks of money (or equity in the house) and expect to get pension credit when her money runs out, or council provided care home, etc...

Kev64

Moving onto an open-ended extension of her existing mortgage might be the simplest option, but - I do have two major concerns with doing that.

1) She currently gets a contribution towards her mortgage payments from the Benefits Agency of (I think) about £60 pm. Now that the original mortgage has ended, will the Benefits Agency continue to contribute to an open-ended extension ?

2) What would happen when she eventually dies ? Will the Building Society just repossess the house ? Demand instant payment of the outstanding capital ? Obviously they won't wait around for months whilst I try to sell it (if I choose to). I'm worried that entering into an extension of the existing mortgage might put the house at risk.

getmore4less

The new loan might just be an extension to the terms on the existing one the key will be the terms of the interest rate so check that stays good.

Not sure about the benifits but something to check readup first don't ask they may just cut you off.

Assuming no other assets to pay the mortgage during administration, the house will be relatively safe, the mortgage company might be prepared to roll up interest, ask them since you have to talk to them anyway about extending te loan, they may want paying but usualy let the official process go through which can take a few months.

given the age you should look at the situation with the will, executors and learn a bit about the IHT and probate.

If yu never want to live there then taking owership(even part) can have implications with potential CGT later.

MOST important what does mum want to happen, especialy if she can't continue to live in the house at sme point.

Jenniefour

You need to speak to a solicitor who specialises in this area, as a lot of the issues you mention have important legal implications which you and your mother need to be crystal clear about so you can decide what to do based on what your mother wants and what would you would be willing/able to do. That's the most important part - understanding the legalities and implications of the options as well as your mother making a will. This does not sound like an unsolvable problem at all - and hope all works out well !

Thrugelmir

That mortgage has now come to an end and the Building Society have written to ask how she intends to pay the outstanding amount. She, nor I, have any money to do this, thought we do have letters from the Building Society confirming she could extend the mortgage on the same interest-only basis until her death.

This is contradictory information.

What did the BS say in the letters of extension?

Gorgeous_George

It doesn't look like contradictory information to me.

Do you have any brothers or sisters? What happens if you die first?

GG