I want to pay off my son's mortgage

labarinto

My son been made redundant effective in the New Year and while re-skilling, it is most probable he will need to apply for and be dependent on Job Seekers Allowance and Universal Credit for some time. He has negligible savings and will have no other income; his wife works shift work on a zero-hours contract earning between £150 and £300 a week. It will be tough for them with a mortgage (c. £600 a month) and the usual utility bills plus of course food and usual living costs. They have a 10-year-old child at the local primary school but there are still additional schooling costs to pay for.

I am aware that if I help him out, such as by paying money onto his bank account to meet their expenses, that will be regarded by DWP/HMRC as “Income” and will compromise any benefits. I am also 99.9% sure that even using the HMRC permitted gifting rules (£3,000 a year from capital, regular gifts from my income providing my standard of living is not reduced as a consequence), it will be regarded as income and reduce any benefit entitlement.

It is further complicated that, sadly my wife died in June, and the intention always was, on the death of the first of us, to gift him and his sister some money (which will avoid Inheritance Tax if I survive 7 years). But I am again concerned that that giving him a lump sum to pay off part of the mortgage will also compromise any benefits he may be entitled to.

It would be helpful if I could use the lump sum gift to pay off a reasonbable chunk of his mortgage if I can pay it direct to the Mortgage Lender, not through him.

I would appreciate any advice or experience Forum Members may have in this area:

1)    It is possible for me to pay his mortgage lender direct and

2)    Would that not be seen as a gift by DWP/HMRC, and therefore not negatively affect any benefits he may be entitled to?

Thank you.

There was a thread on a similar topic in 2014 but not related to the redundancy/benefits dimension.

bradders1983

Answer to 1) is yes, just ask your son for the sort code and account number of the mortgage. Sometimes there may be a payment reference but that will depend who the mortgage is with, with Halifax and Barclays for example every mortgage has a unique sort code and account number.

You need to consider a few things though.  

- if you are paying the whole thing off he needs to ask the lender for a redemption statement, this will give the final balance day by day.
- the final balance may include a redemption fee of a few hundred quid
- he may be tied in to a rate with early repayment charges, this applies if you are paying off the full balance or a lump sum. Barclays for example allow you to pay an extra 10% off per year. He needs to check if this applies and if it does, what overpayment is allowable.

getmore4less

Are you likely to be paying IHT needs  an estate over £500k-1m  if you have a house and transferable nil rate bands

gifts do not increase the tax liability they are in most cases IHT neutral for 7 years when they drop off.

gifts are not income and should not count unless retained as saving 
https://www.entitledto.co.uk/help/benefits-charity


if you have the income to support regular gifts then may be a chunk of the mortgage first and then regular gifts from income keeping suitable records.

Exodi

Agree with bradders - I can overpay my Nationwide mortgage by sending money to a bank account with a particular reference.

To add to his comment (which listed the majority of the considerations for your plan - my mortage also has a 10% overpayment limit per year) you should also have your son specify where the overpayments will go before you do this - you can usually request that they either reduce the monthly payment (but the terms stays the same) or the mortgage term (but the monthly payment stays the same). It's usually recommended to reduce the term but in your case it would be preferred if it reduced the monthly payment to allow them that extra breathing room - cutting X years off their mortgage doesn't help them at all with their current situation.

But paying zero towards the mortgage would be even better than paying a reduced amount, have they kept up with their monthly payments? They may able to request a 3 month payment holiday from the lender as this support has been extended - they seem like prime candidates.

See here: https://www.moneysavingexpert.com/news/2020/03/uk-coronavirus-help-and-your-rights/

getmore4less

you can usually request that they either reduce the monthly payment (but the terms stays the same) or the mortgage term (but the monthly payment stays the same). It's usually recommended to reduce the term

unless you are hitting overpayment limits all the time  it makes a tiny difference  changing term over reduced payment. 

Reality is in many cases it does not change the term anyway as that would require the mortgage affordability check,  all that happens is the payments stay the same(they just call it reduce term) until the next recalculation trigger when the payment gets changed based on the contractual term.