Lending to family - contract needed if repayment based on future house sale?

Squirrel60

Hello,

I'm considering lending money monthly from my income to my wife's parents to help pay off their mortgage into their retirement. The house will be left to my wife (and sibling) so the money should come back to us this way. However I want to avoid a future hypothetical situation whereby they could be required to sell their house to pay for social/healthcare in old age and that money is taken by the local authority.

Let's say we lend them £50k over the next 10 years, would a simple home-brew but witnessed contract/agreement backed up by bank statements/transfers ensure that this debt would be repaid from the estate and only any remaining money be taken by the local council? I'm not sure what mechanism could be used to safeguard our money invested in the house.

jonesMUFCforever

Squirrel60 wrote: »

Hello,

I'm considering lending money monthly from my income to my wife's parents to help pay off their mortgage into their retirement. The house will be left to my wife (and sibling) so the money should come back to us this way. However I want to avoid a future hypothetical situation whereby they could be required to sell their house to pay for social/healthcare in old age and that money is taken by the local authority.

Let's say we lend them £50k over the next 10 years, would a simple home-brew but witnessed contract/agreement backed up by bank statements/transfers ensure that this debt would be repaid from the estate and only any remaining money be taken by the local council? I'm not sure what mechanism could be used to safeguard our money invested in the house.

A legal charge now would surely trump the council's claim later on as long as they could not prove you were doing this to deprive capital to avoid fees.
Take proper legal advice - would they transfer the property into joint names with you?

Money_Rollercoaster

This isn't exactly an answer, but perhaps of some use ... deliberate deprivation of assets might have some relevance (on the page)


https://www.saga.co.uk/magazine/money/personal-finance/giving/what-you-need-to-know-about-signing-property-over-to-your-children


Perhaps also look into the term "private mortgage" ...


https://www.saga.co.uk/magazine/money/personal-finance/family/selling-part-of-your-home-to-your-children

pvt

We've done something very similar to what you want to do. Only difference is we gave my in-laws a lump sum.

We did this as a rolled up mortgage. The down side is you need to pay for solicitors on each side to draw up, execute, and register the mortgage. But then it's all above board and there's then no argument about deprivation of assets in the future, nor any issue if divorces or sibling fallouts occur.

The final issue is that the interest payable on the rolled up mortgage is taxable when it eventually gets paid off, but we built that into the interest rate.

Squirrel60

Hello,

Thanks for the replies, some options to look at in more detail, although from my view I don't really want anything that ends up with us legally responsible for the remaining mortgage debt (since I don't have a lump sum to clear it in one go, and my own income may change in future, I have mortgage, kids of my own etc.).

I'm really just looking for a potentially flexible i.e pause monthly contributions if needs be, way to help reduce their debt with a protection to get that money back on the future sale of property without our or my wife's siblings sizable contributions ending up being seen as part of their parents estate by local authority.

I found the following link I'll share for anyone else, sounds similar to what you did pvt

rubbish I'm not allowed to post links telegraph article from 2014: 11174487/How-do-I-protect-money-lent-to-my-parents-in-the-form-of-an-equity-release-mortgage-from-my-siblings

Although I thought I read somewhere it's not possible for regular folk to put a legal first charge on a property, it's a restricted activity and you need to be an official money lender? So possibly use something like this to formalize it, although not bothered about charging interest,

rubbish I'm not allowed to post links lawdepot

Cheers!

MEM62

This isn't a take advice from a forum situation. It is a sit down in front of a lawyer and be guided properly situation. What you spend on legal costs will be well invested.

Squirrel60

Thanks everyone, I think with the help on here and from reading around I'm now in a better position to go and have a discussion with a solicitor.