Advice needed for MIL! Mortgage end - no funds to pay off mortgage? Bank won't extend

Nickij

My MIL realised her Mortgage term is coming to an end.

Originally the mortgage was taken out by my FIL, and we assume at this time there was some repayment vehicle in place. However my MIL became both physically and mentally ill, and FIL lost his job, but then stayed at home to be her carer. This was years ago. The interest on the mortgage was cover by benefits (mortgage was around 40k).

However about 10 years ago, FIL ran off with another woman in America. They are now divorced. There is much more to history of my MIL situation, however I will try and keep to the facts relevant to the problem at hand. The house was then transferred into MIL name.

With all her other issues and unfortunately she isn't very financially minded she didn't realised that the mortgage term was coming to an end.

Also recently she had a Grant loan on the house, to allow repairs and alterations done to the house (for example a disabled bathroom, stair lift, fixing roof and windows) which has been secured on the property. She has to pay this back if/ when the property is sold. This loan was around £25K.

She has never missed a mortgage payment.

The bank however will not extend the term of the mortgage because she is on benefits. So she now faces losing the property - which is now specially equipped for her disabilities, and a home she has lived in for over 25 years.

We were wondering if there is anything we can do to get round this? My BIL offered to be guarantor for the mortgage. But the bank said this wasn't possible, but suggested BIL took mortgage on in full.

I am guess this means that effectively MIL would "sell" house to BIL for the remaining 40K mortgage plus £25k loan. and then pay BIL rent (house is worth around £160k). But we are unclear of where her benefits would stand at this point, in terms of how much she would get. Also I guess this means BIL would effectively become a Landlord? So he would have to pay Tax on any "rents" he would receive.

My husband is also willing to go joint on this if it means that they can save there mothers from losing her home. Neither of them are interested in making any profit from this, or it being any advantage to them, but obviously they also want to insure they are not going to put themselves in a situation where they may also become financially vulnerable.

Thrugelmir

Nickij wrote: »

but obviously they also want to insure they are not going to put themselves in a situation where they may also become financially vulnerable.

Then you need to consider the options carefully.

If the mortgage is affordable then it should be possible to secure part ownership of the property. This would avoid the rent issue.

As there are various scenarios, consulting with a solicitor may be advisable. So that the amount borrowed and loaned can be repaid without issue.

Have you considered remortgaging your own properties to clear the MIL's debts?

Nickij

Unfortunately remortgaging mine and my husbands property isn't an option as we only have about 10-15% equity in our home ( we bought at the height of the market). My BIL, does not have a mortgage he actually lives with us, and therefore would possibly be able to take on this mortgage - as he does not already have one.

I agree we probably need to speak to a solicitor, but as that is going to have costs associated with it I assume, I wanted to try and get some idea of what might be possible before committing to any expenditure, that might in the end still be futile.

LBPEEP

Buy to let mortgages normally prohibit letting to a family member so you might need to explore the possibility of your brother in law getting a residential mortgage for your MIL's home. Could he do this, live with her for six months and then apply for consent to let and if granted move out? Rather than a solicitor, I would speak to a mortgage broker (someone free) for guidance on how much he could borrow and what terms to assess cost. Then a tax advisor for ideas on the implications for your MIL's benefits, your BIL's tax liability etc. I think the tax doctor (google for address) does a free initial consultation over the phone, but I haven't used them myself so cannot recommend.

Caz3121

Nickij wrote: »

I am guess this means that effectively MIL would "sell" house to BIL for the remaining 40K mortgage plus £25k loan. and then pay BIL rent (house is worth around £160k). But we are unclear of where her benefits would stand at this point, in terms of how much she would get.

Be careful with the assumption that she will get any benefits. You cannot claim housing benefit for a property that you previously owned within the last 5 years (except if repossession was on the cards)
Also have a look at deprivation of capital - by selling a £160k asset for £65k she in gifting away £95k and they may well stop all means tested benefits so even if brother-in-law let her live rent free she may end up with other benefits being stopped. This depends on what benefits she receives, some may be fine eg. DLA but anything means tested will be affected