Grandparents want to buy our mortgage

ag7972

Hi,

Our mortgage is currently about £120,000 had an initial discussion with my grandfather about them possibly buying our mortgage and us paying them back at a slightly reduced interest rate, as they aren't getting a great return on their savings at the moment. We currently have 15 years left on the mortgage and would be renewing for 5 or 10 years at a rate of 2.64 or 3.19%. I'm not really sure what to make of the offer or if it would be sensible or not as I guess there would be the potential for things becoming complicated. Has anyone done anything like this before?

Many thanks.

mrginge

'Buying our mortgage'

What on earth does this mean?

ag7972

mrginge wrote: »

'Buying our mortgage'

What on earth does this mean?

Just the term they used, I mean they become our mortgage lender rather than the building society.

elsien

You mean they will lend you the money to pay off your remaining mortgage, and you then repay the loan to them on whatever terms are agreed between you? So a straightforward loan from grandparent to grandchild?

ETA What would happen if you were unable to pay for any reason - ie you lost your job/got into debt? What's their security? The mortgage lender can repossess your house if it all goes pear-shaped. What would your grandparents do to cover such an eventuality?

ag7972

Yes, sorry if I was unclear.

ag7972

These are the considerations that I was thinking of, although I don't see it being a problem. My partner and I borrowed under what we could afford so that if ever one or the other if us was to become unemploymed we can sustain our payments in one wage. We would get it all legally drawn up obviously.

Mojisola

ag7972 wrote: »

We would get it all legally drawn up obviously.

Before anything gets decided, both sides should get legal advice so that all situations can be worked through. It can work well as long as all involved are clear about possible problems.

Would you still want the loan to be for 15 years like the mortgage?

What's the chances of your grandparents needing their money before then - paying for residential care or home carers, for example?

What if they die before then - your 'mortgage' will be a debt against the estate and will have to be repaid. Would you be able to raise the funds to do that?

mrginge

Drawing up an agreement to cover all the what-ifs is going to such a hassle and I doubt that any financial benefit would be significant enough to make it worthwhile.

DandelionPatrol

Mojisola wrote: »

Before anything gets decided, both sides should get legal advice so that all situations can be worked through. It can work well as long as all involved are clear about possible problems.

Would you still want the loan to be for 15 years like the mortgage?

What's the chances of your grandparents needing their money before then - paying for residential care or home carers, for example?

What if they die before then - your 'mortgage' will be a debt against the estate and will have to be repaid. Would you be able to raise the funds to do that?

True that the mortgage will be a debt [in favour] of the estate. But I see not need for it to be repaid on death unless the mortgage is written to require this.

You also allude to 'deprivation of capital', which would need to be investigated - but arguably the capital would be intact in OP's property, secured by a charge, so deprivation does not apply. The worst thing might be arguing with some functionary in a Town Hall who refuses to comprehend, rather than a genuine deprivation of capital issue.

Finally it should not be a 'mortgage' in quotes, - it needs to be a proper mortgage

Mojisola

DandelionPatrol wrote: »

Finally it should not be a 'mortgage' in quotes, - it needs to be a proper mortgage

Wouldn't it just be a loan?

Mojisola

Mojisola wrote: »

What's the chances of your grandparents needing their money before then - paying for residential care or home carers, for example?

DandelionPatrol wrote: »

You also allude to 'deprivation of capital', which would need to be investigated - but arguably the capital would be intact in OP's property, secured by a charge, so deprivation does not apply. The worst thing might be arguing with some functionary in a Town Hall who refuses to comprehend, rather than a genuine deprivation of capital issue.

I wasn't alluding to 'deprivation' - the money isn't being given away so it wouldn't apply here.

I was wondering whether the grandparents could develop a need to pay for care - either residential or at home - that they wouldn't be able to cover because the money was tied up in the loan.

Some grandparents are healthy 60-somethings; others are frail over-80s - although life can change in an instant, it's more likely that older people will need their money sooner than later.