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Loan to Repay Mortgage - Advice Required
X-man
Posts: 57 Forumite
Hi, I’m after some advice and give some brief history below;
My father passed away a few years ago, which left my mother with an outstanding mortgage of approximately £50K. As her income reduced substantially as a result, this balance was transferred to an interest only product, which allowed my mother to remain in the family home.
The mortgage term is now up and £50K is due for repayment, with no funds in place.
Mother is over 75 years of age, so in order for her to remain in the house, I and my two sisters have agreed to take out personal loans to repay the outstanding balance. In return, my mother would like to gift us the property.
The property value is way under the IHT threshold, so it all sounds straightforward enough but are there any other factors which we need to consider before going ahead?
My father passed away a few years ago, which left my mother with an outstanding mortgage of approximately £50K. As her income reduced substantially as a result, this balance was transferred to an interest only product, which allowed my mother to remain in the family home.
The mortgage term is now up and £50K is due for repayment, with no funds in place.
Mother is over 75 years of age, so in order for her to remain in the house, I and my two sisters have agreed to take out personal loans to repay the outstanding balance. In return, my mother would like to gift us the property.
The property value is way under the IHT threshold, so it all sounds straightforward enough but are there any other factors which we need to consider before going ahead?
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Comments
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Potential 'deprivation' charge in terms of the gift (or even selling under value).Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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Why personal loans and not a mortgage?0
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A lifetime mortgage is an option but the interest rates for those type of products is around 6% which makes it unfeasible and as you have stated, residential mortgages are not available for over 75's.
Whats the 'deprivation' charge all about? Who's being deprived?0 -
The following may help explain ...
http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/
... can also apply in terms of any other liabilities.
The answer here would appear possibly to be a 'second home' mortgage based on the income of the siblings and ignoring mothers/age income. Allocate ownership in relation to the debt undertaken by the siblings.
There are a handful of lenders who will do this if properly structured and the siblings' affordability stacks up.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
As far as I can see from info about deprivation of assets when entering a care home, you have to have been aware of the imminent need for the person to enter care for it to be considered deprivation? If OP's mother is not likely to enter a care home in the very near future it wouldn't apply.Senior_Paper_Monitor wrote: »Potential 'deprivation' charge in terms of the gift (or even selling under value).
Perhap's OP and siblings should seek legal advice about purchasing the property but with a clause enabling his mother to stay there for as long as she requires?Kavanne
Nuns! Nuns! Reverse!
'I do my job, do you do yours?'0 -
The definition is generally "would have had reason to expect or suspect" - and while the definitions are very vague and open to interpretation the word 'imminent' is definitely not used.
I have at no time said it is an issue - but was answering the specific question "are there any other factors which we need to consider before going ahead?". Obviously I have no way of judging whether the issue applies it this case, but it should be considered.
Gifting is generally a bad idea - as there are many potential risks (plucking one out of the air - if one of the siblings was to divorce there is a supportable claim by the estranged partner on a share of the assets).
I believe the structure I suggested is likely to be possible and probably offers the best/fairest all round solution and protection if it proves possible.
... and CERTAINLY ... "the OP and siblings should seek professional legal (and financial) advice".Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
If your mother is going to gift you the property, why not take out a mortgage on it, rather than personal loans?0
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Purchase full market value(no deprivation or IHT issues) give a life interest(no rent, no CGT issues) pay off the loan and give the rest of the cash to the parents.
then it is just a raising funds issue.0 -
If your mother is going to gift you the property, why not take out a mortgage on it, rather than personal loans?
Personal loans would seem easier because the outstanding balance is being raised by three people who would each have a third share in the property........
I assumed a mortgage may be problematic with three applicants.0
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