paying large lump sum into mortgage

janiehee

Hello. We currently have a fixed rate mortgage that will need renewing in a year or so. My in laws have kindly offered to give us a large lump sum to pay off some of the mortgage. (they will expect us to pay interest on it though, as it is essentially an advance on my husbands inheritance and they want to make it fair to his siblings).

We will obviously be waiting until the end of the current fixed rate to pay this lump sum off. I was wondering, at the point at which we pay a large lump sum in - will the mortgage company need my in laws to fill in paperwork to show where the money came from due to the money laundering regs? (I know this is the case with initial deposits).

thanks

davidmcn

I don't think it's routinely asked for, no (similar to deposits into other bank accounts).

chunkytfg

The fact you're paying interest on it makes it not a gift and as such your parents would have a stake in your house. Mortgage lender don't like having to share!

Also if you're paying interest to your in laws its hardly an advance on your inheritance! What would the interest rate be? Is it really worth it? Either have them allocate an proportionately less amount of their estate in their will or don't bother and just wait.

janiehee

chunkytfg wrote: »

The fact you're paying interest on it makes it not a gift and as such your parents would have a stake in your house. Mortgage lender don't like having to share!

Also if you're paying interest to your in laws its hardly an advance on your inheritance! What would the interest rate be? Is it really worth it? Either have them allocate an proportionately less amount of their estate in their will or don't bother and just wait.

Well they have actually offered to pay the whole thing off which is a lot of money but we have other credit card debt we haven't told them about! so just trying to decide what to do. The advantage is that we have a young family and can't currently afford childcare so I'm not working. We have been struggling with our monthly outgoings with one salary so not having to pay back the capital and just paying interest obviously reduces our current outgoings. The interest rate is very fair so it doesn't make us any worse off in the long term than if we were paying the interest to the mortgage provider.

My father in-law is unlikely to agree to alternative arrangements as he has 4 children and he has done similar with two of them (the other one is loaded and doesn't need his help!). He was a very senior financial director of a large company and is very fixed in his ways of what is the right way to do things financially!

getmore4less

janiehee wrote: »

Hello. We currently have a fixed rate mortgage that will need renewing in a year or so. My in laws have kindly offered to give us a large lump sum to pay off some of the mortgage. (they will expect us to pay interest on it though, as it is essentially an advance on my husbands inheritance and they want to make it fair to his siblings).

We will obviously be waiting until the end of the current fixed rate to pay this lump sum off. I was wondering, at the point at which we pay a large lump sum in - will the mortgage company need my in laws to fill in paperwork to show where the money came from due to the money laundering regs? (I know this is the case with initial deposits).

thanks

Do they realise that the interest will be taxable?

janiehee

getmore4less wrote: »

Do they realise that the interest will be taxable?

I'm sure he does, he was a management accountant / financial director of a large company. He still lectures and is a consultant so has to do his tax return. I didn't know that myself, but sure he would.

chunkytfg

janiehee wrote: »

Well they have actually offered to pay the whole thing off which is a lot of money but we have other credit card debt we haven't told them about! so just trying to decide what to do. The advantage is that we have a young family and can't currently afford childcare so I'm not working. We have been struggling with our monthly outgoings with one salary so not having to pay back the capital and just paying interest obviously reduces our current outgoings. The interest rate is very fair so it doesn't make us any worse off in the long term than if we were paying the interest to the mortgage provider.

My father in-law is unlikely to agree to alternative arrangements as he has 4 children and he has done similar with two of them (the other one is loaded and doesn't need his help!). He was a very senior financial director of a large company and is very fixed in his ways of what is the right way to do things financially!

In that case go for it. Pay the whole thing off, give them the small annual interest payment and smash the credit card debts with the extra money spare not going on the Mortgage. Secured debt cleared first IMO as then you're always going to have a roof over your head in the worse case scenario.

For the record £100k interest only @1% is £83 a month!:T:beer:

getmore4less

janiehee wrote: »

I'm sure he does, he was a management accountant / financial director of a large company. He still lectures and is a consultant so has to do his tax return. I didn't know that myself, but sure he would.

It will also be a gift with reservation that will not reduce the estate like a proper gift would.

If he is doing this for other kids that will be a lot of money sitting as gift with reservation on his estate.


ummmm.

janiehee

getmore4less wrote: »

It will also be a gift with reservation that will not reduce the estate like a proper gift would.

If he is doing this for other kids that will be a lot of money sitting as gift with reservation on his estate.


ummmm.

I have no idea about that. I'll have to mention it to him.

AnotherJoe

Can you explain more about the interest? On the face of it that makes no sense. How long would you pay interest on it? What would the interest rate be? If it's more than the mortgage rate, how would this help you? What happens if you stop paying the interest? Do they get their "gift" back?

If they want to equalise between siblings then this can be done in the will by prorating the gift to the % of your house. Eg suppose they pay off 50% the whole value of your house now, then when they die, the other siblings first get the same amount, rated to the value if your house at that time, before you get your inheritance.