Mortgage, Invest or Avoid

SaverDave55

Am currently going through rough time and near the end of a divorce, it looks like my partner wants to move out of our marital home to a new place so going to buy her out (60/40 split in her favour on equity). That means I am going to need to re-mortgage the remaining £330k on the house which is a big stretch. I can just about do it by extending the mortgage term to 27 years to make monthly payments just about affordable but would prefer to have more living spend.

My dad has offered to loan me £50k but I don't want him on the deeds of the house or to be beholdant to him (or his partner). If I put it agaisnt the mortgage I think I will need sign-off that it is a gift or else he will need to be named as a tenant.So I just wanted to know what other options I could best look at to invest and make this money work to help the situation. I suspect he may offer that I can keep in the longer term but then there is the risk of inheritance tax so anything I do needs to be able to cater for that event.I dont want to spend it now as I dont currently ahve anyway to repay in the future aside from using the hosue equity.

Would it be worth looking at stocks/shares or just whack into a couple of ISAs?

dunstonh

My dad has offered to loan me £50k but I don't want him on the deeds of the house or to be beholdant to him (or his partner). If I put it agaisnt the mortgage I think I will need sign-off that it is a gift or else he will need to be named as a tenant

A tenant is someone who lives in the property and pays rent to the owner of the property.

A gift does not mean a guarantor agreement is needed. (in case that is what you meant). It would just need your dad to confirm in writing that it is a gift and not a loan.

 I suspect he may offer that I can keep in the longer term but then there is the risk of inheritance tax so anything I do needs to be able to cater for that event.I

if its a loan, then it never comes out of inheritance tax. if its a gift, it will.

Would it be worth looking at stocks/shares or just whack into a couple of ISAs?

You have just asked if a car or petrol is best. ISAs are a container. Stocks and shares are what you put in a container. Did you mean cash when you said ISAs (as S&S can be held in ISAs).

Realistically, you need to decide what is happening and everthing is sorted before you consider investing anything.

eskbanker

My dad has offered to loan me £50k but I don't want him on the deeds of the house or to be beholdant to him (or his partner)

Not wanting him on the deeds is understandable (but easily avoidable) but surely you'd inherently be beholden to him by virtue of accepting any such loan?

beholden

adjective

owing thanks or having a duty to someone in return for help or a service.

Albermarle

 but then there is the risk of inheritance tax so anything I do needs to be able to cater for that event

There is a lot of misunderstandings about gifts and IHT. Can you explain more where you think the risk is ?

Angelica123

https://forums.moneysavingexpert.com/discussion/6656586/mortgage-invest-or-avoid

I am not sure you are asking the right questions and confusing a lot of different issues. The method of storing money is probably less important than the question of whether you can afford to buy out your partner. Are there any kids involved?

Can your dad afford to gift you 50k? Or is he expecting it back in the future?

It would be useful to have an idea of affordability eg your current savings, salary, and your current equity in your house. What is your current mortgage term?

SaverDave55

https://forums.moneysavingexpert.com/discussion/comment/81896209#Comment_81896209

I probably didn't explain this very well originally as was trying to keep it simple however:

I need to re-mortgage to buy-out my partner (long story) but can only sensibly afford £230k over the max term 27 years which makes my monthly payments just about affordable. I need £280k to cover the buy-out and legal debts however this makes monthly payment very high and not enough to support my family. I have got the ability to obtain this from a mortgage provider but the reality is that would be a struggle. My partner has agreed a settlement figure and we have budgeted to split the childcare costs. It would be a one-off payment plus 50% of my pension.

My dad has the money available after recently moving house so it is cash in an account that he can share/send. What he has said is that because he is old he may need that money back in the next 5-10 years as his pension has diminished a lot. The other scenario is that if he passes away, he wants his (much younger) wife to be able to continue living and have some income stream as she does not earn a lot or have much pension. So for now it would be a loan.

What I'm trying to avoid is putting £50k down as a deposit on the house (in my dad's name - tenant in common) because if he or his wife need that money back I will be unable to repay that amount in one go. I would need to re-mortgage which is likely to be unaffordable or I would need to sell the house, which is what I really want to avoid.

In order to put that money down on the house as a deposit to reduce the new mortgage I need, my dad will either have to declare the money as a gift or loan. If the former then there are no legal ties for me to repay, if the latter then it would require as above the scenario I don't want. I suspect his wife would go through the legal route to reclaim that money should it be required.

If he does gift the money then I would be liable for some element of IHT if he passes away in the next 3-7 years. Again, I would have to re-mortgage or find another way to pay that tax if that scenario occurred.

The alternative that I was looking at is for me to obtain the max mortgage amount I need (£280k) then use the £50k in another way (e.g. ISA or investments) to help reduce/offset the monthly payments and make living more affordable. I haven't researched anymore than this as its been hectic with the situation. It would also mean that I could repay the money more easily if not tied into the house or if he did decide I could keep it then could address the IHT if that was needed. (If doing this I could use the gift allowance to reduce the total per year as well.)

SaverDave55

Even a £100 - £150 monthly supplement would make the higher borrowing of £280k possible.

SaverDave55

ugh, correction, I need £360k to cover buy-out and legal fees/debts and £330 as min which is affordable….. I've been looking at too many spreadsheets and tweaking numbers :(