Dealing with parents mortgage debt..

sweeping

Hi,

So I've become aware of a very problematic situation on my parents end and I need to start to figure out what they need to do, namely with their mortgage.

I've very recently found out, that their Mortgage term is up in ~3 years and this is an interest only mortgage with a balance of ~£350K outstanding.

They don't have a repayment vehicle, they have some savings, but nothing near the outstanding balance (I believe they have savings in the region of £20K) - sigh. I wondered what people would advise here.

It's causing me a huge amount of stress since I learnt of their situation, I need to approach them to talk with them about this and try and start looking at their options asap.

I wanted to stop of here first to see what people may suggest/what will actually happen?

1) Get a agent to value the house now to see what possible sale price it might get? Get it on the market asap if the expected value is higher? What happens if the valuation is less than the current mortgage balance?

2) What happens if they just ignore, guessing repossession in a few years time?

3) I have no idea how council housing works. If the house isn't worth much more than the current mortgage balance, i.e. they won't be able to afford to buy another cheaper house - what is the process (both of them are over 60)?

Unfortunately I really can't take the risk on taking out another mortgage to buy their property, so that's not really an option, although they have already asked me to do this.

Many thanks for any help.

glosoli

If the property is sold for less than the outstanding balance of the mortgage, they will be liable for the shortfall.

If the mortgage runs beyond maturity, their case will fall to the lenders matured mortgages department (normally a part of the banks collections unit), who will make contact with them to establish what they are doing to organise repayment of the debt, and allow time for practical solutions, however this would not go on indefinitely and repossession of the home could be on the table, and again if the property is sold for less than the outstanding balance they would be liable for the short fall.

What would you estimate the value of the home to be?

sweeping

Thanks for your response.

Honestly, no idea - a lot of it needs a great deal of updating which is where doubt I'll be able to give an accurate estimation. Local similar properties in the area have sold anywhere from 400-600K+ - however, all pretty modern inside. Put it this way, if I were a buyer, I would want to gut it.

Probably best bet to coax my parents into getting a few valuations asap to see where they stand.

AnotherJoe

sweeping wrote: »

Hi,

So I've become aware of a very problematic situation on my parents end and I need to start to figure out what they need to do, namely with their mortgage.

I've very recently found out, that their Mortgage term is up in ~3 years and this is an interest only mortgage with a balance of ~£350K outstanding.

They don't have a repayment vehicle, they have some savings, but nothing near the outstanding balance (I believe they have savings in the region of £20K) - sigh. I wondered what people would advise here.[COLOR="

It's causing me a huge amount of stress since I learnt of their situation, I need to approach them to talk with them about this and try and start looking at their options asap. Don't let it cause you stress, it's not your financial problem and don't let the, make it your financial problem. . As below, don't get suckered into any financial contributions it's their behaviour that got them into this mess

q

Unfortunately I really can't take the risk on taking out another mortgage to buy their property, so that's not really an option, although they have already asked me to do this.

Many thanks for any help.

Thank goodness for that, because it seems otherwise they would be quite happy for their financial irresponsibility to land you in hot water as well, which I find disgusting.

Presumably as they can pay a £350k mortgage they could afford to rent. Are they working? Do they have pensions? Would their income in the future allow for that ?

Otherwise they can move somewhere cheaper and buy or rent. Sounds like they will have some decent equity, in some parts iof the country £100-£150k would get you a very nice house

ACG

If the mortgage is £350k-ish and with a bit of work could be worth up to £600k I would look at how much it would cost to do the property up. Lets say they spend that £20k they have and it sells for £550k, that gives them £200k in cash if they were to sell it.

Another option could be to do equity release - the upside to this is that they lose their mortgage and live in the property, the downside is that you will unlikely see any inheritance. The longer they hold out (ie the older they are) the more they are likely to get.

csgohan4

well done for not agreeing to help them pay off their mortgage. Money and family do not mix. You could fall out with them tomorrow and they could exclude you from their will, losing the money you have put in.


Looks like selling up may be a prudent course of action.

Thrugelmir

Are your parents still in work, retired, ???

silvercar

csgohan4 wrote: »

well done for not agreeing to help them pay off their mortgage. Money and family do not mix. You could fall out with them tomorrow and they could exclude you from their will, losing the money you have put in.


Looks like selling up may be a prudent course of action.

Wow!

There was me thinking that families support each other.

OP has done well to look at the problem now.

Downsizing would be one option, another may be equity release, Family Building Society now do a mortgage that allows you to continue interest only for a few more years.

csgohan4

silvercar wrote: »

Wow!

There was me thinking that families support each other.

OP has done well to look at the problem now.

Downsizing would be one option, another may be equity release, Family Building Society now do a mortgage that allows you to continue interest only for a few more years.

There has been plenty of threads of people giving money to family, buying houses with brothers. The risk exposure is too great.


Unless there is a solicitor's agreement and a charge placed, it is risky to simply go on a gentleman's agreement with that amount of money.


If you want to give money to your family, generally don't expect it back.


You have to understand who put themselves in this position? they are not 11 year olds are they, people have to take responsibility for their actions.


Yes help them when you can, but not to the detriment of your own family and finance, ultimately dragging you down into the black hole of debt.

AnotherJoe

Well said CSG, there's a world of differed between supporting the parents, e.g. Advising what to do, and being dragged down by their irresponsibility for example taking on their £350k mortgage which is what they asked the OP.

csgohan4

AnotherJoe wrote: »

Well said CSG, there's a world of differed between supporting the parents, e.g. Advising what to do, and being dragged down by their irresponsibility for example taking on their £350k mortgage which is what they asked the OP.

Glad I'm not the only one without rose tinted glasses