Help Parents with Mortgage

BillySmith

Looking for some advice. My father lost his job 18 months ago and now the family are struggling to pay £1100 mortgage per month. They do not want to downsize. We believe the property is worth over 300k and there is about 115k outstanding on the mortgage. My dad, mum and brother all live in the family home. Mum and brother work. My parents are both in their mid 50's. I also work and live in my own property and have a joint mortgage with my wife. My current property is worth 150K and has 120K outstanding on the mortgage. My Salary is 50k and my brothers salary is about 20k.

I want to take over the mortgage with my brother and hopefully remortgage over a longer term so that the monthly payment amount is significantly reduced. What is best way to accomplish this? Also would my brother be able to remortgage with just his name on the property with a salary of 20k?

What are the pitfalls i need to look out for? What impact will having my name on 2 properties have? I was thnking about moving in the near future will this hinder that? What other options do we have to reduce the monthly payment amount? etc etc

Also we live in Scotland if that makes any difference..

Thanks in advance!

Kynthia

I'm no broker or solicitor and i dont know how things might be different in Scotland, but it doesn't seem workable in the way you are suggesting. You can't take over a mortgage, what you do is buy the property with your mortgage and your parents repay their mortgage with the sale proceeds.

So at the moment you are suggesting that you and your brother buy your parent's house as it's very unlikely they can stay on the deeds and not be on the mortgage. How much are you giving them for it? If you aren't buying it at market value then they are giving away all their equity for no money, which is risky and could be deemed 'deprivation of assets' should they need any benefits or care. Their home is now at risk shoukd you or your brother ever get into financial difficulty, go bankrupt, divorce or pass away while the property is in your names. I know you think these won't happen but who knows over the years and they shouldn't be under this risk.

Then there's practicalities of whether you and your brother will qualify for a mortgage high enough to do this. You and your brothers credit histories will now be linked so if one of you has bad credit it could affect the other ongoing. As you own a property already you may have to pay the new second home stamp duty to do this plus your affordability will be affected when looking to buy a new home for yourself. Also as it's not your home you will be liable for capital gains tax when you 'sell' and even if you just give the property back to your parents it's still a disposal and I believe the calculation for CGT will be done at market value. Also will your brother feel trapped there and in able to move, and if neither owners live there then a residential mortgage could be a problem, particularly if your parents pay you anything that could be construed as rent as then you'll be landlords and need to comply with those laws and regulations.

These are the issues that spring to my mind. There may be other solutions worth considering such as keeping your mum on the mortgage, which eliminates some of the issues but not all. Or they could see a broker and find out what mortgage options they have depending on your mum's income and their age.

xylophone

Are you in a position to lend your parents the money to help them to make their mortgage payments?

Is your father aged over 55? Does he have a pension that he can access?

BillySmith

Yes he is 56 no pension or savings left unfortunately as he already took the lump sum previously to help with things. I can lend them half the money each month but it is still a struggle for them to afford the mortgage and all bills, because the monthly mortgage payment is so high. If we could get the payment down say below £700 then we would cope more comfortably with things untill my father finds work. I am looking for options that would allow us to do that.

Thanks Kynthia for giving me some points to think about and research. Yes i am aware it would involve us buying it as you mentioned. They would sell it to us for the minimum 115k i.e enough to pay their mortgage off (assuming that is possible?). It would be fine to keep mum on the mortage too if that helps (not hinders) the situation? she is 53. My question here would be if we can still get a mortgage term long enough to cut the payment down below 700 with mum on it aswell. Her salary is probably also around 20k mark.

Also my father has not claimed a single penny in benfits for the whole 18Months+ that he has been unemployed, based on the financial stuation i have described, is he likely entitled to anything? He tried to claim previously but was fobbed off. Why might this be? Is it to do with my mum being in work or the value of the property?

Who should i speak with to get advice/get the ball rolling on this?

Thx

Caz3121

BillySmith wrote: »

Also my father has not claimed a single penny in benfits for the whole 18Months+ that he has been unemployed, based on the financial stuation i have described, is he likely entitled to anything? He tried to claim previously but was fobbed off. Why might this be? Is it to do with my mum being in work or the value of the property?

assuming he was job-hunting he would have been able to receive contribution based JSA for a period of 26 weeks, after this time it would stop and your mothers income would mean no eligibility for income-based

The problem will be that they use the previous 2 tax years for qualification. As he has not worked for 18months it is likely that the years looked at will not have the contributions required to qualify

Kynthia

Your dad hasn't found work in 18 months so it could be quite a while until he does. Plus there must be a lot of stress on him and your mum with worries about making the mortgage. What pensions do they have or are they at risk of never being able to pay off this £120k plus interest mortgage in retirement?

If so then surely they should give serious thought to downsizing to a property that thry can afford and will meet their needs in retirement? Your brother could consider moving out on his own which will give him more freedom than owning his parents' house. Surely this is better than putting their only asset at risk by giving it away to you and your brother, who will be burdened with the responsibility, restrictions and additional costs for years. Or equity release/lifetime mortgage might be an option but i don't know if they're too young or won't like the resulting impact on your inheritance.