Tricky Interest Only Conundrum!

debsyb23 · 12 March 2018 at 3:38PM

Thank you for taking the time to read this post.

My partners' parents bought a flat for him which is paid for outright however his parents have taken out a 10yr interest only mortgage for £60k on their own property to do this and no one is saving for the capital which means the flat would need to be sold to pay of the £60k in 10 yrs time or in the event of his father passing (lets hope thats not the scenario!). This has come to light as my partner was planning to move in with me and then all this came out. We were planning to use the flat rental money to buy a boat and go on an adventure! He is currently paying his parents £150 a month which we now understand is paying the interest only monthly fee.

I think it makes sense to see what we can do and hold on to the flat for long term security/pension. My partner is unlikely to get a mortgage so that won't work. I have a mortgage on my flat for £132k (valued at £185k) and I earn £37k maybe I could get another mortgage? Would it need to be a BTL, then where do I stand in terms of tax? Could his parents get a repayment mortgage that we pay - his dad is 74. The flat in question is valued at £125k. Or do we just start putting money aside and pay the interest only as well if we can? Not sure what makes most financial sense. However neither of us really want to be tied to using all our earnings to pay for the £60k over the next 8-10 years.

Thank you all thoughts appreciated, I'm not very good at finance!!
Dx

TrickyDicky101 · 12 March 2018 at 3:48PM

If you don't want to be restricted through needing to raise loan repayments, why not sell the flat and give his parents the money back? I'm afraid I don't follow your reasoning of wanting to keep it if it will be a burden.

Typhoon2000 · 12 March 2018 at 3:49PM

Assuming the flat is in your partners name, the best way it would seem is for him to get a £60k Mortgage on the flat and pay his parents off.

enthusiasticsaver · 12 March 2018 at 4:07PM

Your partners parents are too old to get another mortgage. I am amazed they got an interest only one too as they are difficult to come by now.

I am not a lover of BTL so personally would sell it.

The only way you could raise the money is either for your partner to take a mortgage out on the flat to repay the £60k on his parents mortgage but you say he cannot get a mortgage. Why not?

If you raise the money on your property you will need some safeguards in place so you need legal advice on this. Maybe a charge on his mortgage free flat? Your lender may not be willing to lend for this purpose though so you may need to change lenders. Your partner moving in with you has its own issues too though so again legal advice is recommended as he may have a claim on your property.

All in all it is not simple unless you just sell the flat and repay the £60k to your partners parents and use the balance to either invest or use to buy a boat

getmore4less · 12 March 2018 at 4:20PM

debsyb23 wrote: »

Thank you for taking the time to read this post.

My partners' parents bought a flat for him which is paid for outright however his parents have taken out a 10yr interest only mortgage for £60k on their own property to do this and no one is saving for the capital which means the flat would need to be sold to pay of the £60k in 10 yrs time or in the event of his father passing (lets hope thats not the scenario!). This has come to light as my partner was planning to move in with me and then all this came out. We were planning to use the flat rental money to buy a boat and go on an adventure! He is currently paying his parents £150 a month which we now understand is paying the interest only monthly fee.

I think it makes sense to see what we can do and hold on to the flat for long term security/pension. My partner is unlikely to get a mortgage so that won't work. I have a mortgage on my flat for £132k (valued at £185k) and I earn £37k maybe I could get another mortgage? Would it need to be a BTL, then where do I stand in terms of tax? Could his parents get a repayment mortgage that we pay - his dad is 74. The flat in question is valued at £125k. Or do we just start putting money aside and pay the interest only as well if we can? Not sure what makes most financial sense. However neither of us really want to be tied to using all our earnings to pay for the £60k over the next 8-10 years.

Thank you all thoughts appreciated, I'm not very good at finance!!
Dx

Use it to start overpaying the debt if you want to keep the flat.

What sort of boat you could have got for an adventure with £300-£400pm?

fewcloudy · 12 March 2018 at 4:37PM

debsyb23 wrote: »

Thank you for taking the time to read this post.

My partners' parents bought a flat for him which is paid for outright however his parents have taken out a 10yr interest only mortgage for £60k on their own property to do this and no one is saving for the capital which means the flat would need to be sold to pay of the £60k in 10 yrs time or in the event of his father passing (lets hope thats not the scenario!). This has come to light as my partner was planning to move in with me and then all this came out. We were planning to use the flat rental money to buy a boat and go on an adventure! He is currently paying his parents £150 a month which we now understand is paying the interest only monthly fee.

I think it makes sense to see what we can do and hold on to the flat for long term security/pension. My partner is unlikely to get a mortgage so that won't work. I have a mortgage on my flat for £132k (valued at £185k) and I earn £37k maybe I could get another mortgage? Would it need to be a BTL, then where do I stand in terms of tax? Could his parents get a repayment mortgage that we pay - his dad is 74. The flat in question is valued at £125k. Or do we just start putting money aside and pay the interest only as well if we can? Not sure what makes most financial sense. However neither of us really want to be tied to using all our earnings to pay for the £60k over the next 8-10 years.

Thank you all thoughts appreciated, I'm not very good at finance!!
Dx

So you two have a flat (that is already worth £125k) but need to pay 60k toward it, and over 10 years? You also want a boat/adventure, and you want a pension.

Maybe you need to prioritise which of these things comes first and how much you are both prepared/able to pay toward this each month.

silvercar · 12 March 2018 at 6:12PM

The parents have the option of taking an equity release mortgage in 10 years time. May effect the inheritance in the future, but it would enable you to have your cake and eat it.

AnotherJoe · 12 March 2018 at 7:14PM

silvercar wrote: »

The parents have the option of taking an equity release mortgage in 10 years time. May effect the inheritance in the future, but it would enable you to have your cake and eat it.

Seems a bit cautious and won't buy a boat right now which is obviously important,you can hardly expect them to wait ?!

How about parents sell house, pay off flat, move into flat and give the money to kids to enable a decent boat.
And if kids run out of money they can wire back to parents who each have a spare kidney that's probably worth a fair bit.

John-K_3 · 13 March 2018 at 12:16AM

I am reminded of the scene in the Shawshank Redemption where the guard is complaining about the tax he will have to pay on his windfall.

Tricky Interest Only Conundrum!

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