Advice on paying mortgage off with help from family

benkil

Hi,

I currently own a property with my ex-partner who I am trying to remove from the deeds. Unfortunately I cant afford the mortgage in my sole name but I have a family member who is willing to pay the mortgage off in full as well as the 20% help to buy loan. 

My question is this, could I pay the mortgage off in full if my family member gifted me the money but leave the help to buy loan as it is and not repay it? Or would the help to buy loan need to be repaid if the mortgage was paid off in full?

Also does anyone know what the tax implications would be for my family member to gift me the money to settle the mortgage? Is this the best way for her to help me?

Many thanks!

Alter_ego

Have you considered that your ex owns a share of the house, even after mortgage is paid off.

benkil

She is willing to have her name removed from the deeds, she has no interest in the property so im guessing it would just be a case of a solicitor removing her from the deeds?

benkil

I have given her some money as her settlement. She has already signed a legal document confirming she has no interest in the property going forward. She’s just anxious to be taken off the deeds ASAP.

I have emailed the Help to Buy people to see if the loan needs to be repaid if I settle the mortgage. 

getmore4less

 Unfortunately I cant afford the mortgage in my sole name 

I have emailed the Help to Buy people to see if the loan needs to be repaid if I settle the mortgage. 

How big a mortgage can you afford?
Not sure on the limits on mortgage size around the H2B but rather than pay off all the mortgage if there is an amount that meets the H2B criteria and is under your limit then keep the mortgage.

You still need a plan for the H2B loan.

As for the gift no tax on you unless it is over the donors nil rate band it does not drop off their estate for 7 years(full amount for the full 7 years)  but that is in most cases IHT neutral upto the 7 years.

warby68

How will you remove ex from liability for the Help to Buy loan? Its not the deeds she wants to come off primarily,  its the mortgage and any other liability for that property.
I would have thought that once the Help to Buy Loan is interest bearing it is better to pay that off first as that stays as a fixed % of the property value whereas a mortgage doesn't.
No expertise at all though, I only know the bare bones of Help to Buy - however these were the points that stood out.

benkil

We still have 4 years before the Help to Buy becomes interest bearing. The plan was always to sell the house before that happens.

you can remove people from the help to buy loan by following the change of ownership (transfer of equity) process so removing her from the HTB isn’t an issue.

the issue is the mortgage but my family member can clear this in full. Once it’s cleared I presume a solicitor can remove her from the title deeds.

warby68

I'd be very surprised if you were allowed to have a HTB loan without a mortgage. If it were possible, the scheme would be ripe for abuse and use way outside its intended purpose.
You are probably expected to reduce/repay the HTB loan in preference to the mortgage and morally (accepting this is my judgement) that would be the right thing to do noting what the scheme is designed for.
The general scheme terms say the HTB loan must be repaid when the mortgage is repaid but I'm not sure if that refers to the end of the 25y term or at any point.
Either way I think you need to check with the scheme administrator before doing anything as you don't want to redeem the mortgage and then receive demand for the HTB loan with no way to pay it.
The likely solution seems to be a reduced mortgage but one that is above the HTB scheme minimum  or a pro rata reduction in both debts but that's just pure guesswork so check it out thoroughly.
You have to apply to remove someone from the HTB loan and some commentary suggests there is an affordability assessment on the sole income so it will all come out.