88-year-old with interest only mortgage

Mike307

My 88-year-old mother has an interest only mortgage with a Spanish banking group, the outstanding balance circa £25 k. The bank is sending her letters asking for her plans to pay off the mortgage which ends on 3rd June 2020. My brother and I are willing to pay off half each of the outstanding debt however I would like to protect my “investment” but I’m not sure what steps I should take next, any advice gratefully received.

Nick_C

A secured loan on the property. Or you and your brother each buy a stake in the property as tenants in common. Would suggest doing this through a solicitor.

Alternatively, approach the lender and see if they would agree to extending the interest only mortgage.

Your mother could also consider equity release schemes, but this would take a large part of her estate when she dies.

AnotherJoe

Secured loan. Doesn't need to be complicated, a letter from your mother acknowledging the debt, if you want via a solicitor, probably a good bet in case it looks dodgy to, for example, HMRC or local council if they have any need to investigate later.

Thrugelmir

There's no need to do anything as yet. As you've some 22 months before the money is due to be repaid.

davidmcn

And the bank is only asking now because it's a regulatory requirement that they make sure that interest-only borrowers are fully aware of the capital debt. It's entirely possible they'll be content with her continuing to pay the interest until doomsday (certainly more likely than them evicting a 90 year old).

AnotherJoe

On the radio yesterday, woman who gave her mother money to pay off mortgage. Mother now in care home, council taking the house and thus the woman's money to pay for care. Had it been done under some sort of loan or charge, then the woman would have had control of that money, so your instincts to protect it are bang on.

Nick_C

AnotherJoe wrote: »

Secured loan. Doesn't need to be complicated, a letter from your mother acknowledging the debt, if you want via a solicitor, probably a good bet in case it looks dodgy to, for example, HMRC or local council if they have any need to investigate later.

Isn't it only secured if you register a charge on the property?

I have a debt to my CC provider. There is an agreement covering the debt. I acknowledge the debt. It is not secured though. There is no charge registered on my property.

TBagpuss

Yes, a secured loan is secured on the property,so a letter from mum would mean you had an unsecured loan, not a secured one.

You and your sister could lend the money to your mum, in which case you would each have a charge over the property (basically, she still has a mortgage, but you and your sister are the lender, rather than Santander).

OR

You and your sister buy a share of the house, and you have a declaration of trust drawn up saying what % you, your sister and your mum each own.

Neither case creates any issues with deprivation of assets, for future care costs, as they are transactions at a proper market value.

The second option could involve you and your sister having a CGT liability if the value of the house goes up, and assuming you currently own your own homes, you would I think also potentially pay higher stamp duty.

AnotherJoe

Sorry my bad, sloppy wording. My point was to get the debt acknowledged in writing so the council cant take it.

silvercar

AnotherJoe wrote: »

Sorry my bad, sloppy wording. My point was to get the debt acknowledged in writing so the council cant take it.

Would need to be secured on the property to give a guarantee that it would be repaid if the property needed to be sold for any reason.

If it was an unsecured loan, it wouldn't stop the council from requiring the property to be sold to fund care. Leaving it unsecured means it would be a debt on the estate ( in the fullness of time). Making it secured means it is paid once the property is sold for any reason.

amnblog

Pay a Solicitor to sort this for you. Simple process.