Paying off somebody else's mortgage

Stevo_safc

My parents have recently split up, and my grandfather has offered to pay off their mortgage in full after the ownership has been transferred solely to my mother.

Is this allowed? If so, would he need to transfer the money to my mother for her to then pay off the mortgage and the bank, or would he be able to pay it off directly?

Would there be any future implications from this? The remaining balance is about £22000 of a £58000 mortgage.

Thrugelmir

Has a financial settlement been agreed in terms of the divorce? 

Stevo_safc

Thrugelmir said:

Has a financial settlement been agreed in terms of the divorce? 

Yes a settlement has been reached.
The ownership of the house is being transferred to my mother, and then my grandad is going to pay off the mortgage.

Thrugelmir

In that case the mortgage can be discharged once the transfer is complete. 

Stevo_safc

Thrugelmir said:

In that case the mortgage can be discharged once the transfer is complete. 

Would there be any tax implications?

I read that if my grandad were to die within 7 years of gifting the money, then it would be subject to inheritance tax. However I imagine my grandad's estate will far under the £325000 inheritance tax threshold so would that even come into it?

Thrugelmir

Stevo_safc said:

Thrugelmir said:

In that case the mortgage can be discharged once the transfer is complete. 

Would there be any tax implications?

I read that if my grandad were to die within 7 years of gifting the money, then it would be subject to inheritance tax. However I imagine my grandad's estate will far under the £325000 inheritance tax threshold so would that even come into it?

With regards to IHT. Worth checking nevertheless. If just for peace of mind. 

clueless_but_curious

Yes it is a PET.  If your Grandad's estate plus chargeable PETs etc is less than his (plus unused deceased spouse if applicable) exemption, no tax to pay

davidmcn

Of course, if he doesn't make the gift and the money is still in his account when he dies, it will definitely be part of his estate for IHT purposes anyway. 

getmore4less

Stevo_safc said:

Thrugelmir said:

Has a financial settlement been agreed in terms of the divorce? 

Yes a settlement has been reached.
The ownership of the house is being transferred to my mother, and then my grandad is going to pay off the mortgage.

The mortgage company do not have to agree the chance.

Might be easier and cheaper to get the solicitor to discharge the mortgage  at the same time as doing the transfer.

Thrugelmir

getmore4less said:

Stevo_safc said:

Thrugelmir said:

Has a financial settlement been agreed in terms of the divorce? 

Yes a settlement has been reached.
The ownership of the house is being transferred to my mother, and then my grandad is going to pay off the mortgage.

The mortgage company do not have to agree the chance.

The mortgage remains in joint names while ownership is changed to sole.