Loan to pay off Mortgage? Plz help!

Sallygreen30_2

Hello!

Thanks so much for reading this, I'm a bit lost!

Myself and my partner are in our 30s, we live with my partners mum. We really want our own space, his mother is now 73 years old, doesn't keep very well and doesn't have any family so as she gets older, we will be taking responsibility for her. His mum has a mortgage left on her house of around £40,000, the house is worth around £300,000. The house has been in the family since the 1960s and my partner was brought up here by his now deceased father, so he has a strong emotional connection to the house and would find it hard if he had to sell. So basically we decided that the best solution to keep the house, and have our own space/ a family, would be to build a large extension on land that we have on the side of the house (subject to planning permission obviously). We would need to build something big enough for hopefully 1 or 2 kids to grow up in in the future. However, his mum has a retirement mortgage with HBOS where she only pays the interest on the £40,000. They went to an appointment yesterday to see what the options would be for an extension, we thought we may be able to transfer the house ownership to my partner so that he could take out a repayment mortgage for the £40,000, and then release equity or remortgage in order to get the funds for our extension. However, that's not possible. The only way to transfer the property to my partners name in order to borrow against the house, is to pay off the £40,000. I have around £5000 savings which could go toward this (although I hoped this could go toward furnishing the extension!).
Sainsbury's Bank, and my local credit union now do personal loans up to £40,000 but it can only be paid off in shorter periods of time I.e 7 years which would work out around £600 per month, meaning we would have a £600 loan to pay off, plus whatever costs we would have to remortgage... This seems a bit steep? Im not clued up on remortgaging costs or even how much the extension may cost, but if it was another £500-600 per month, there's no way we would afford this. We were hoping to pay something like that amount in total had we just bought somewhere of our own!

There surely must be an easier way to do this?

Any help would be appreciated.

Thanks
Sarah

Pixie5740

It's not surprising that HBOS won't allow the transfer of ownership of a property when the £40k loan is secured against the property.

Who did your partner and his mum go and speak with? Someone at HBOS or an independent mortgage broker? If it's the former then they should go an see an independent mortgage broker to discuss their options. With the sums involved then a mortgage is the easiest way to go about this although your partner's mum gifting him the equity whilst continuing to live in the property will be an issue for some lenders and she should also look into Deprivation of Assets.

Extensions aren't cheap, you could easily spend another £40k extending the property. Get some quotes from a few builders to find out if your plan is feasible.

Sallygreen30_2

Thanks. It was a hbos adviser.

Why is deprivation of assets an issue? My partner has been paying his mums house and mortgage costs for the past 13 years although it has always been in her name, does this make any difference?

Thanks

Sallygreen30_2

Also, this is to help prevent her going to a care home if it came to that one day, not to avoid fees, we don't intend to have care fees if at least one of us is here for her....

foxy-stoat

Does the Mother have any other children?

You cannot take out a personal (unsecured) loan for the purposes of buy a house, thats what mortgates are for....Have you actually been offered a £40,000 for the purposes of buying property at 7% interest?

Can you and your partner not take out your own mortgage and buy it from the Mother for say £200,000, then she can take her own legal advice and gift you £100,000 for the extension and she live there for ever rent free?

Sallygreen30_2

No unfortunately there is no other close family, only my partner.

My partner and I can only get a mortgage for a maximum of around £175,000 which to be honest is a bit out of our budget. When I check mortgage calculators they ask for the property value rather than the sale price, so if I put in £300,000 it won't calculate a mortgage for us at that amount... I don't know how it works with mortgage companies if you are buying something a lot cheaper than the value price... i imagine that would count as 'gifting' again and I'm not sure how that would work with the deprivation of capital thing mentioned above, even though we don't intend to have care for her, maybe lenders have rules I think we may be best going to speak to a financial advisor. Any other advice is still appreciated though!

Thanks

Sallygreen30_2

You cannot take out a personal (unsecured) loan for the purposes of buy a house, thats what mortgates are for....Have you actually been offered a £40,000 for the purposes of buying property at 7% interest?

When I asked my credit union they said it would be fine. It's already a bought house, this is paying off someones mortgage rather than using it to get a mortgage. Is that any different?

Sallygreen30_2

I.e Technically I could take the money and give it to his mum, then she pays her mortgage off?

McClane54

get the money, gift it to the mother to pay it off