helping dad not lose his house!

asmo75

Hi, any advise would be great on this matter please.

My dad retired 4 years ago after the sudden death of my mum. he quit his business which they ran together and moved back into the family home (since 1980) which still had a £120,000 mortgage on it. He "should" have used the insurance money he got from my mum passing to pay the mortgage, he didn't, instead he shoved it in the bank so that he could just live comfortably and not have to worry.

However, 4 years later all the money is gone and he is struggling to make mortgage payments (£114,000 still to pay) he's 65 so just has state pension which barely covers all his outgoings. He's terrified that the bank will repossess the house and doesn't know what to do. we're trying to help where we can but not sure what we can do.

Myself, my wife and our 2 young children rent a house locally as i'm in year 3 of an IVA so in no position to buy a home but we were wondering if there is anything we can do to stop us losing our family home?

My brother is also in a similar situation renting nearby with his wife and young son.

Can we transfer the mortgage to us?
can we pay the mortgage through my dad, move in and rent it off him and him move out, maybe to rent somewhere cheaper?

we're all very concerned and my dad is very distraught about the bad decisions he's made so hopefully we can help him somehow.

Thank you for reading and i hope someone can offer some words of advise

many thanks

rob

somethingcorporate

Is it big enough to house your family and your dad?

asmo75

Yes, probably, but that wouldn't be an ideal situation for any of us.

Thrugelmir

asmo75 wrote: »

Yes, probably, but that wouldn't be an ideal situation for any of us.

Though for a period of time maybe beneficial to all parties concerned.

Yorkie1

If he's 65 and £114K is still owing, when does the mortgage actually expire? Is it a full repayment mortgage, or part / full interest only?

You can't transfer the mortgage to you; it needs to be paid up and a new one taken out by you. However, that would a) involve your Dad selling the property to you; b) might raise deprivation of assets issues if he needs means-tested benefits or care if it's not done at market value; and c) as you say, you're in an IVA anyway.

Your other suggestion has him effectively losing his home anyway, if he has to move out. Also, if he is no longer resident then he: becomes a landlord (lots of legal duties); has tax implications; and has to inform his mortgage company, seek consent to let (which may or may not be granted, with or without an interest rate rise and is only temporary only) and pay his own rent too.

If neither you nor your brother are able to buy it off him, and neither would it work for either of you / your brother & family to move in with him and effectively pay him rent as lodgers (i.e. he doesn't move out), then the only other option other than selling up which might just be a possibility is equity release.

I am not an expert and do not know whether your dad's situation fits the criteria where it might a suitable route to explore. Others will hopefully comment further and provide links to the relevant way to look further into this, if necessary.

wwtrend

You can of course all live together as a family. If you pay the mortgage and all he has is a state pension which isn't means tested then there isn't going to be any tax implications for him.

I do not know how many bedrooms the house has but your Dad should consider taking in a lodger. You can earn £3250 (or thereabouts) before there is any tax liability. This amount is over and above the £10K income allowance before tax. So work out what dad gets as a state pension a year and he will only get taxed on income above £13250 the first year. If you need to do any decorating in order to get a lodger in ie the lodger's bedroom, the bathroom or kitchen etc arrange to do it after they move in because it will be tax deductible. Lodger's do not have the same rights as tenants and your Dad doesn't have the same legal responsibilities as a landlord. Look up the Government's rent a room scheme. You can pick up a simple lodger's contract from WH Smith's or off the National Landlord Associations website. There is no necessity to give notice for a lodger to quit over and above what you have agreed in your own contract. So if he doesn't get on with the individual then he can ask them to leave. You do have to tell the mortgage company but just send an advice that you are taking in a lodger. Most don't have a problem providing it isn't more than two. You will have to speak about the insurance over contents cover and may need to pick up a special policy. This seems to be the best way forward for your Dad to stop him losing the house. Get the right lodger and you may be able to get them to take a turn doing the garden etc. Go for someone with a job locally so there are no issues on getting payment and you can ask for a deposit so they would pay one months rent as a deposit plus the rent on moving in. You are not obliged to put the deposit into a deposit scheme as landlords are but don't forget you will need to return it when the individual leaves.

As the homeowner your dad will be responsible for council tax and will lose his 25% discount and most rents for lodgers tend to include utilities as it is much easier than trying to manage dividing anything. This then gets reflected in the weekly/monthly rental amount. You might get an idea of the rental in your area from Rightmove, a local estate agent, the local authority housing benefit rates for his area or postcard adverts in local newsagents. Phone calls can be paid for as they usually come itemised. Make sure your lodger knows the scheme you are on ie free local calls after 6pm and weekends. To fix the monthly rental work out a weekly payment x52 then divide by 12 and collect monthly. Time the payment so it comes in about 10 days before the mortgage is due so your dad isn't tempted to spend it. As your dad is retired and about the house all day in any event he may not notice any rise at all in the utilities bills. If with a lodger(s) he is able to pay more than the monthly mortgage payment he should be encouraged to do so. The mortgage is paid off much quicker and your dad will not become dependent on any extra income. Once the mortgage is paid then he can decide whether he wants to live alone again.

I have had lodgers in for periods to cover financial difficulties and about to do it again. I prefer to live alone but it's far better than risking your home and can be good company if you get the right lodger.

Get proof of identity, get a company to do some credit checks on the individual, references from the place before last and lay down rules about girlfriends/boyfriends staying over, sharing of chores ie hoovering etc, what shelves are whose in the fridge/freezer, washing up straight after meals etc and it should be okay.

Hope this helps.

wwtrend

Lodgers are by far the easiest and fastest way to increase your income for a given period. If your dad is already in arrears with the mortgage company get him to speak to them straight away so they know what is happening.

There are other options which can be considered. Can you let us know
a) the market value of the property
b) the monthly mortgage payment and if the mortgage is interest only or capital and interest repayment
c) the time left on the mortgage to run
d) the area of the country your dad's house is in
e) the type of property ie 2 bed terraced 3 bed semi etc.

I believe your dad's income is going to be £136.77 a week?

There will be other options we can explore with you. IVA's don't actually stop you getting a house. They just stop you getting a mortgage which is not the same thing.

Just to clarify is the object to keep your dad in the house or to retain the family home within the family. I think your dad would struggle to rent something just on a state pension and there are better options open to him if there is space and equity in the property than there are for you and your brother through renting or acquisition. What rent are you and your brother paying for your current accommodation?

getmore4less

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

asmo75

wwtrend wrote: »

There are other options which can be considered. Can you let us know
a) the market value of the property - £120-£130k
b) the monthly mortgage payment and if the mortgage is interest only or capital and interest repayment - he said about £450/month and i dont know the type, sorry
c) the time left on the mortgage to run - who knows, it was remortgaged about 10 years ago, again.**update - its interest only payments with 8 years to go then he has the whole amount to pay!**
d) the area of the country your dad's house is in - Selby, north yorks
e) the type of property ie 2 bed terraced 3 bed semi etc. 3 bed mid terrace

I believe your dad's income is going to be £136.77 a week? - he said he gets about £600 a month or thereabouts

There will be other options we can explore with you. IVA's don't actually stop you getting a house. They just stop you getting a mortgage which is not the same thing. ( this sounds appealing)

Just to clarify is the object to keep your dad in the house or to retain the family home within the family. I think your dad would struggle to rent something just on a state pension and there are better options open to him if there is space and equity in the property than there are for you and your brother through renting or acquisition. i suppose we want to keep the home in the family, my dad thinks he's going to pass away and thats the reason for blowing all his money, he didnt think he'd be here to deal with this issue. either me or my brother would love the house if there was a way as we've both grown up there, i've started to discuss with my dad about maybe a council property and selling up or something

What rent are you and your brother paying for your current accommodation?we both pay around £550/mth rent currently and approx 40 yrs old each.

i hope the info above is of some help

wwtrend

Firstly sorry I haven't been around the last couple of days.

I am having a little bit of difficulty with the figures you have given me. If the mortgage has reduced over 4 years from 120K to 114k then it is a cap+interest repayment. The majority of the interest gets paid earlier on. At £450 monthly your dad has repaid around £21,600. If the capital reduction is correct then the mortgage should be completely repaid in 8 years time. If it's an interest only mortgage on £120K then he's paying about 14.2% interest and more if its £114K. I think it's important that you find out exactly what amount was remortgaged and on what terms.

Your dad can sell to you or your brother ie exchange contracts giving permission for you to move in upon exchange and delay completion. Until completion the mortgage remains in your dads name and he remains as owner on land registry. Completion must be in sufficient time for this property to be finalised before the repayment amount is due if this is an interest only mortgage.

Residential contracts are usually done on exchange and completion within 6 weeks. The seller repays their mortgage and the buyer takes another one out. Commercial property has always been bespoke contracts and that is what you are doing. There is no legal obligation for the buyer and seller not to make their own arrangement provided none of the individual terms are not illegal.

So either you or you brother could buy the property and exchange and move in. Payments can be made from any account to the mortgage and you could pay £500 per month towards the mortgage. After 4 years the 'buyer' will have made payments of £24600 towards the property which equates to
a 19% deposit if the sale price is agreed at £130K. The buyer whose IVA's will be paid off and a deposit of 19% can be demonstrated you shouldn't struggle to get a main stream mortgage. This can never be guaranteed because mortgage rules keep changing but you can test the market to see if you can get a mortgage at this stage and make a decision to try again in another couple of years. Yorkshire property hasn't risen according to current residential market reviews so if the London bubble pops after the election and interest rates go up it's unlike imo to affect the regional markets that haven't experienced the fast rises that other areas in the UK have.

I would think there will be a rise in the property value though. You need to speak to a solicitor who is also a property investor to cover your position in the event of your father's death prior to completion to have that covered. There should also be a charge on the property by the buyer to cover their interest in the property between exchange and completion and to prevent the buyer taking any further loans against the property. Make sure your father has also done a will after getting the legal advice if completion hasn't taken place before his death. Also you will need to make sure that this deal will stick if your dad has to go into a home or something and the council want to sell the house. I think if there isn't more than 23K in the equity you will be alright under the new care regs but you do need to take advice on this.

Now if your dad was paying £450 a month month there are currently 25 properties upto 2 bed for rent in Selby under £400 to rent according to Rightmove which don't seem so bad to me. As a home owner your dad would not be entitled to HB until completion.

Also remember 1% stamp duty is payable on the sale of property over £125000 -£250000 and they might be looking for this on exchange unless you have a good solicitor to negotiate with them to pay on final completion.

I wouldn't want to hang onto a mortgage that is 14% interest as interest rates will go up and that will be I expect after the election.

Can I suggest you, you brother and your dad take yourselves off to a PIN (property investors network) meeting. There is one in York on 21st May and Leeds on 28th May and speak to the organiser about your problem. There may be a deal analysis doctor before the main meet or if not you can ask during the meet. You do not have to explain that this is about you if you don't want just a problem you are looking to solve. The first meeting is free is you contact the organiser beforehand and £20 thereafter. You will be able to find the names of solicitors who are also property investors and willing to undertake this transaction for you. It's a specialist transaction but can be set up in a matter of days if you want with the right guy. There may be other options others can think of because the reality is you are really only limited by your imagination in what you can do with property.

Get the information I asked for about the mortgage exact though. If you want a valuation of the property value a local estate agent is best placed to do it for you. £120k to £130K is too wide a range at this price. If its £125K agree the purchase price at £124,500. Unless you want to agree a price now that you both estimate the house might be worth in 5-8 years time which would be beneficial to your dad. His pension is unlikely to keep pace with rents over this period and you don't want him to financially strapped or having to keep moving and downgrading his standard of living. I suggest if this is a family decision the family sit down and sort out the payments collectively what you want to be doing.
I still think the rent a room would be your dads best option
Hope this helps.

wwtrend

If you get other offers when you go to the meeting don't make any decisions on the night. Take time to think about them and you are welcome to bounce them back to this forum and I'll say what I think. You will find that no-one will be feeling sentimental about property but I understand it both ways. Not about my own home but the one where my mum lives and was shared with dad who died a long time ago. Good luck