Being a guarantor on mother's mortgage

markus201

Hi Everyone,

I am in need of some advice, I've found myself in a strange moral/financial situation and I don't know how to proceed.

You need a bit of background. My mother and father divorced rather messily 15 years ago, after this my mother went through a period of depression and was unable to keep a job. She had a decent amount of savings and proceeds from the divorce and was able to live off these for a while, however she then fell foul of a vicious foreign relationship scam and lost just over £70,000 which was never recovered. This wiped out most of her savings and hurt her tremendously emotionally and made her shrink further from the world to the point she now rarely leaves the house. She kept this a secret from me out of embarrassment, only telling me when she released her savings would run out.

Since this, I have been paying her mortgage and household bills for the last 8 years, not directly, I transfer her the money monthly and she pays it from her account. The rest of her minimal living expenses have come from what remained of her savings. The savings have now run out. She has asked me for more money, however I have pushed back, which eventually forced her to take some temp jobs, which she does maybe 3-5 days a month. I see this as a positive thing, however she complains about it being stressful on her and it's had little effect on her mental health.

Last week she came to me and said she had a plan. She is 6 years away from being able to claim her civil service/state pension so she wants to re-mortgage her house to release £60k in equity on a interest-only basis. However, the banks have said that because she has no savings and no regular income, she would have to have a guarantor. She has asked me to be her guarantor and to pay the slightly increased mortgage interest payments.

On the surface this is not a huge impact to me financially, however I do not understand the full meaning of this financial relationship. I wonder if you could help me understand.

- Will this be recorded as a debt against me (i.e. for credit file purposes). I am concerned as I am currently gearing up to buy a second property with my partner as a buy-to-let income. Could this impact my ability to get a second mortgage?
- She has also said she intends to tell the bank that she has an 'income' from me, so she can pass the affordability test. Surely the bank are going to see through this, or will they not care as the house is the security on the debt rather than against me personally?
- I don't have too many concerns about her keeping up payments, as I am actually paying them. However if something happens to me, and I am unable to pay her, and she is therefor unable to pay the repayments. What exactly happens? Will this be recorded as a defaulted debt against me?

Is there a better way to do this? I wondered if she could 'sell' me a share in her house and I take out the mortgage personally?

It's all very messy, and stressful, and I worry about what will happen to her in the long term.

Thank you for listening.

foxy-stoat

What does she want £60,000 cash for ?
It will count as a debt against you and may or may not affect your next mortgage - depending on the numbers.
She cannot say she receives income from you, unless she has submitted her annual tax returns to the HMRC and declares all income.
Sounds like she wants to transfer another 5 figure sum to someone abroad again to me.

You may have to speak to a broker about being on the mortgage with your Mum, there will be some complications I am sure.

markus201

Ostensibly to cover her living costs for the next 6 years and to have enough money to put into making her home ready for sale at a good price as it has fallen into a bad state of disrepair since she hasn't spent any money on it for 15 years.

MalcRH12

Totally different avenue but have you thought about buying her house as your long term buy to let? Would this be a sensible option?

markus201

MalcRH12 wrote: »

Totally different avenue but have you thought about buying her house as your long term buy to let? Would this be a sensible option?

Unfortunately I'm not in a position to be able to afford a mortgage of that size given that I would have a non-paying sitting tenant in there for the foreseeable future. I need income from my BTL. Also I don't really want to put myself in a position where I have to evict my own mother!

Mojisola

markus201 wrote: »

I have been paying her mortgage and household bills for the last 8 years

I don't have too many concerns about her keeping up payments, as I am actually paying them.

Is there a better way to do this?

Instead of helping her get access to a lump sum that may be wasted and leave her in a worse position, change the money you are giving her into a loan to be repaid when the house is sold. That way, if she needs residential care in the future, your loan will be repaid.

firesidemaid

just a quick reply...

is she claiming all the benefits, including ESA/PIP that she is entitled to?

If you are paying / giving her a sum each month you will be able to borrow less based on affordability costs.

Whilst very admirable and understandable, whilst you are helping her out she has no inclination to help herself - even if that is to deal with / manage her mental health better.

E30M3

markus201 wrote: »

Unfortunately I'm not in a position to be able to afford a mortgage of that size given that I would have a non-paying sitting tenant in there for the foreseeable future. I need income from my BTL. Also I don't really want to put myself in a position where I have to evict my own mother!

I thought you were paying the mortgage anyway?

If you took it on and made it interest only it would reduce your outgoings.

E30M3

also a quick check on https://www.comparethemarket.com/mortgages/ shows skipton offering 1.41% which is £70 PCM for £60k...

markus201

She does not claim her ESA. I have tried many times to get her to do this, pointing out that it is money she entitled to and has effectively paid for in taxes and NI over her working career but she does not deal well with strangers and being outside the house. She tried it once and the stress of going to the meetings and check-ins did not work for her.

I know this may sound pathetic, but depression affects people in strange ways. She is not a lazy person by nature, in fact only last weekend she was at my place helping with some renovation and put in two solid days work that would put some builders to shame!

I assume claiming PIP for depression would require her to undertake some sort of assessment?

markus201

E30M3 wrote: »

I thought you were paying the mortgage anyway?

If you took it on and made it interest only it would reduce your outgoings.

I see your point - I had never considered taking it on as an interest only concern.