Paying off someone else's mortgage...pitfalls?

I am due go inherit a sum of money next year. I had originally thought I would put it towards a deposit for my own property. However, circumstances have changed and I am considering paying off a relative's mortgage as they rather unexpectedly are no longer able to work and will probably never be able to again. I don't want them losing the house they worked so hard to keep all these years.

Are there any points I need to consider about paying their mortgage off from a legal standpoint?
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  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    It's your money you can do with it whatever you wish.
  • dunstonh
    dunstonh Posts: 119,173 Forumite
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    Are there any points I need to consider about paying their mortgage off from a legal standpoint?

    It ceases to be your money as you have gifted it to them.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • You are very generous.

    Is it your idea, or has someone else planted the seed?

    Consider these opportunities do not come often and things/relationships 'change' over time.
    Debt is a symptom, solve the problem.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Finchy2018 wrote: »
    Are there any points I need to consider about paying their mortgage off from a legal standpoint?

    If you gift it then it is just like a cash gift(no longer yours) and becomes a PET on your estate.

    If you are claiming any benefits or may need to then you should learn about deprivation of assets if not already familiar with that concept

    If a significant amount and there are IHT implications for you then there is potential for a DOV to mitigate/eliminate those.

    Anything else like is being a loan(even interest free) or you owning part of the house there are more complications.
  • You are very generous.

    Is it your idea, or has someone else planted the seed?

    Consider these opportunities do not come often and things/relationships 'change' over time.

    It's completely my idea. I have not approached the subject with the intended recipient yet. But they have been very good to me and I don't want them to face losing their home which is a very real possibility. I'm happy to write the money off as I'm not fussed about home ownership myself so it's better someone else benefit from it.

    I wouldn't be asking for it back it would certainly be a gift not a loan or buying into the property myself.
  • It depends how old you are. Can I be honest? Look after yourself first.
    I know it seems selfish, but unfortunately if you're unlikely to get that sort of money again it just seems mad to gift it away if you aren't already on the ladder yourself. Please don't be shortsighted.

    If you choose to gift it, that's fine and incredibly kind of you. But please explore every avenue first.
  • Where do you live? In rented and what is your financial position? Whilst gifting it to your relative is laudable it may affect their position re benefit claims and certainly you should make sure your financial security is stable.
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  • I'm in the south east and in rented. I have been playing with mortgage calculators and maybe I'm doing something wrong but I think i will struggle to get a mortgage that covers the rest of the price of a house here and that's only for 1 bedroom. Moving area is currently not an option and I really like the place I'm currently in!
  • You will have more chance obtaining mortgage with deposit including the inheritance , than without it.

    I know you say you really like where yo live, but you have to be realistic and pragmatic about your location of your first home (especially in SE)

    Your relative has to sort out their own problems without your assistance as they are a grown up and can downsize etc.

    The individual who died and left you the inheritance wanted to support you, have you considered why they left you the money and how they would react if they know what you were planning.

    As someone earlier said, its OK to be selfish.
    Debt is a symptom, solve the problem.
  • davidmcn
    davidmcn Posts: 23,596 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    How much longer can the relative afford to stay in their house, even if it's mortgage-free? If they're unable to work can they physically cope with staying there for much longer? Will your gift make a big difference to them, or merely delay the point at which they are entitled to claim benefits?
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