Paying off dad's mortgage before he loses his home?

charley1

Hi, I'm not sure if I'm putting this in the right forum so apologies if it's wrong but need some advice, my dad is approaching retirement age and has no savings and very little income, he is also terrible when it comes to finances and has buried his head in the sand for far too long. He can no longer afford his mortgage but still owes around 34k, his flat is leasehold with only 51 years remaining and the flat is in major disrepair, he hasn't actually let me inside in 14 years so I can only assume it's bad, he has finally agreed to let me help (after years of me trying) and has now admitted he has no hot water and no power to any electrical sockets. I have been offering for years to help get his flat fixed and a nice place to live for him but like I said he has buried his head in the sand and refused. Recently he has asked for some money to help cover his mortgage payments (I have done this in the past) and I agreed to again but this time only if he would finally let me help with everything, and he is now agreed to this, he hasn't opened letters in years and after getting his credit report up online it shows he has had ccjs added to his mortgage over the last 4 years meaning it's actually going up not down 😞. Keeping a roof over his head is my priority so was thinking of paying off his mortgage (and ccjs) so he didn't have to worry anymore about losing his home. I can afford to clear the debts - just, but obviously would need to protect it and thought putting the flat in my name after pay off the mortgage could be the way to do that, he would then live there rent free without having the burden of monthly mortgage payments. Is this something that can and should be done? Or is there a better way to help whilst protecting my savings that I would be using to pay off his mortgage and debts? I have no idea what his flat is currently worth though the same as his in good condition with a long lease is worth around 180k.
Any help would be much appreciated. 

DE_612183

You could pay off the mortgage, then transfer the flat to your name - but you would pay stamp duty on that as a 2nd home.

Also there may be an issue is that if you pay 34k for a flat worth 180k it would seem like your father is "gifting" you that money - not sure what is health is like but there may be some inheritance tax issues in the future ( hopefully not - but you get the gist ).

RAS

The bigger problem is that a flat with only 51 years on the lease is only going to lose more value over the rest of dad's life. Can the OP afford not just the outstanding mortgage but also the lease renewal? And the essential repairs?

charley1

RAS said:

The bigger problem is that a flat with only 51 years on the lease is only going to lose more value over the rest of dad's life. Can the OP afford not just the outstanding mortgage but also the lease renewal? And the essential repairs?

Hi thank you for your reply, the essential repairs aren't a problem, my husband owns a building company so the costs will be OK, the lease is something I have thought about but I don't know how much that will cost, I'm hoping to find out as soon as possible. He is just in such a financial mess and the thought of him losing his home has me losing sleep. The lease is something I was hoping to save for and extend in a couple of years, I would then look at selling the flat and buying him somewhere smaller outright and hopefully get some of the money back that I put in now(I hope I'm making sense) I really appreciate your replies so thank you. 

charley1

DE_612183 said:

You could pay off the mortgage, then transfer the flat to your name - but you would pay stamp duty on that as a 2nd home.

Also there may be an issue is that if you pay 34k for a flat worth 180k it would seem like your father is "gifting" you that money - not sure what is health is like but there may be some inheritance tax issues in the future ( hopefully not - but you get the gist ).

I don't think inheritance tax will be an issue, other than his flat he doesn't have anything else of value, I don't think his flat could be worth the full 180k due to the condition and short lease, though maybe I should get a valuation so we know for sure. Thank you for replying, all help is appreciated with this situation. 

RAS

Are you planning to cover his mortgage payments, or to pay off the whole mortgage? Might be better to do the former and get the lease extended first.

charley1

RAS said:

Are you planning to cover his mortgage payments, or to pay off the whole mortgage? Might be better to do the former and get the lease extended first.

My plan was to pay off his mortgage (and current ccjs) and have the flat put into my name, the only reason being that if he gets anymore debts/ccjs in the future then they wouldn't be secured against the property as it wouldn't legally be his (though I have no idea if this is allowed from a legal/debt point of view at least)
And I would sleep easy knowing he has a roof over his head. He has finally agreed to let me go to his flat later this week so at least I'll have an idea on how bad a state it is in. 

Brie

Not sure what others think but what if OP lends dad the money to clear the mortgage and other debts and puts a lien on the property?  That would protect her share from the council selling it outright for providing care home fees etc.  Avoid CGT and when eventually the place does get sold she'd get her money back.  

Thoughts?

peb

https://www.lease-advice.org/calculator/

Use the above.

Brie, your plan would work to a point but if the OPs dad gets into future financial difficulties then charges could be placed on the register 

RAS

Think you need to start with facts, not emotions. 

What is the current value, value after lease extension and value with essential repairs?

What is the mortgage, how much other debt is secured on the property (that would probably have to be cleared before any property ownership change), any debts to the freeholder or management company, cost of lease extension, and cost of essential repairs?

Start by getting the deeds from the Land Registry (£3) to check for secured debt, and spend £7 on the lease?

What's dad's situation regarding state pension? Any other pension(s)?

charley1

RAS said:

Think you need to start with facts, not emotions. 

What is the current value, value after lease extension and value with essential repairs?

What is the mortgage, how much other debt is secured on the property (that would probably have to be cleared before any property ownership change), any debts to the freeholder or management company, cost of lease extension, and cost of essential repairs?

Start by getting the deeds from the Land Registry (£3) to check for secured debt, and spend £7 on the lease?

What's dad's situation regarding state pension? Any other pension(s)?

Thanks for the reply, value at present unknown, though I'm going to get it valued so I have a starting point, other properties in the area are selling for around 180k with a long lease and in good condition, so presumably that could be the value after repairs and lease extension, I have already purchased the deeds from land registry, no secured debt showing other than the mortgage, his credit report shows the ccjs - how much etc and they have been added to the mortgage amount (4 separate ccjs over 4 years) so I can only presume these ccj debts were owed to the freeholder /property management company?  As the debt is being added to the mortgage? Please correct me if thats not necessarily the case it's just my assumption. State pension is definitely not going to be a full one, he has been self employed for most of his adult life and has admitted he hasn't done any self assessment accounts for at least 12 years 😞,Thank you again.