Mother's Mortgage / Divorce Settlement / HALP
Discussion
I don't even know where to begin with this.
Situation
1) Parents divorced 6 years ago.
2) Mum kept the house with a £300,000 interest-only mortgage on a 4-bed house worth approx £525,000 (still with my dad's name on it, but legal docs show she has right to sell property without his consent etc)
3) Mortgage has 9 years left to run and is on a standard variable rate (Currently 4.74%) for which there is no penalty for over-payments
4) Mum pays about £1200/month on mortgage but can afford £1500
5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
6) Recently (as in, yesterday) received a lump £60,000 payment (net) from sale of shares which were included in part of divorce settlement. Has paid off £40k of mortgage with this already and kept £20k back. As such current mortgage is now £260,000.
7) Banks will not lend her personally more than £100,000 due to her income.
Goals
1) Mum to keep house as long as possible
2) To reduce capital owed as quickly as possible
Solutions Considered
1) Transfer house to me. She becomes my tenant. Benefits from lower interest rate. Cons of this are a £15k stamp duty bill (if done this month, £30k afterwards) and income tax at 40% on rent received by me from her (less interest, but only until these new BTL income tax changes take place). Also, she no longer owns the house and as much as we trust one another, there is risk of a soured relationship in the future (unlikely, but still)
2) Overpaying the current mortgage as much as possible (£300/month). Benefit is that the house hers and we save on a £15k/£30k tax bill plus any legal fees. Cons are that the interest rate could do "anything" and she only has 9 years before she needs to clear the balance. In 9 years, of course there is every opportunity that I can take on the remainder of the mortgage/become joint owners with her to do this/sell one of my own properties to help clear the balance.
Questions
What have I not considered? What else can we do? Any other implications? I've spoken to my mortgage adviser but am looking for 'outside' in put. Would prefer help rather than criticism and would prefer forward thinking rather than "she should never have taken that mortgage" type comments. For obvious reasons they're not helpful.
Situation
1) Parents divorced 6 years ago.
2) Mum kept the house with a £300,000 interest-only mortgage on a 4-bed house worth approx £525,000 (still with my dad's name on it, but legal docs show she has right to sell property without his consent etc)
3) Mortgage has 9 years left to run and is on a standard variable rate (Currently 4.74%) for which there is no penalty for over-payments
4) Mum pays about £1200/month on mortgage but can afford £1500
5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
6) Recently (as in, yesterday) received a lump £60,000 payment (net) from sale of shares which were included in part of divorce settlement. Has paid off £40k of mortgage with this already and kept £20k back. As such current mortgage is now £260,000.
7) Banks will not lend her personally more than £100,000 due to her income.
Goals
1) Mum to keep house as long as possible
2) To reduce capital owed as quickly as possible
Solutions Considered
1) Transfer house to me. She becomes my tenant. Benefits from lower interest rate. Cons of this are a £15k stamp duty bill (if done this month, £30k afterwards) and income tax at 40% on rent received by me from her (less interest, but only until these new BTL income tax changes take place). Also, she no longer owns the house and as much as we trust one another, there is risk of a soured relationship in the future (unlikely, but still)
2) Overpaying the current mortgage as much as possible (£300/month). Benefit is that the house hers and we save on a £15k/£30k tax bill plus any legal fees. Cons are that the interest rate could do "anything" and she only has 9 years before she needs to clear the balance. In 9 years, of course there is every opportunity that I can take on the remainder of the mortgage/become joint owners with her to do this/sell one of my own properties to help clear the balance.
Questions
What have I not considered? What else can we do? Any other implications? I've spoken to my mortgage adviser but am looking for 'outside' in put. Would prefer help rather than criticism and would prefer forward thinking rather than "she should never have taken that mortgage" type comments. For obvious reasons they're not helpful.
Sarnie said:
If you take the mortgage over, presumably on a BTL product, you can't rent it to your Mother......
I can on a regulated product. We looked into this and found a single lender (I forget who) who would lend to me immediately. All others requested that I owned the property for at least 6 months prior. The plan we considered was to take that product for 6 months (at 6.9%!!!) and then switch to a cheaper product. PurpleMoonlight said:
Why pay all that interest if you don't have to?
If she only needs a one bed property, sell the four bed one and buy that for cash with no mortgage.
She'd like at least 2 bedrooms as I and my brother and our respective partners visit from time to time (we live some distance away), preferably a house not a flat (she has cats).If she only needs a one bed property, sell the four bed one and buy that for cash with no mortgage.
We have looked briefly at smaller/cheaper properties but there's very little out there for her budget (which would be £370,000 I suppose - There are only 4 houses for sale in our home town below that figure) - She may well have to move, but while living in a larger house she has the opportunity to rent out two rooms for £1,000/month which is helpful.
So our main aim is to try and keep here there as long as possible.
romeogolf said:
I can on a regulated product. We looked into this and found a single lender (I forget who) who would lend to me immediately. All others requested that I owned the property for at least 6 months prior. The plan we considered was to take that product for 6 months (at 6.9%!!!) and then switch to a cheaper product.
Good luck with that!!Sarnie said:
romeogolf said:
I can on a regulated product. We looked into this and found a single lender (I forget who) who would lend to me immediately. All others requested that I owned the property for at least 6 months prior. The plan we considered was to take that product for 6 months (at 6.9%!!!) and then switch to a cheaper product.
Good luck with that!!romeogolf said:
She'd like at least 2 bedrooms as I and my brother and our respective partners visit from time to time (we live some distance away), preferably a house not a flat (she has cats).
We have looked briefly at smaller/cheaper properties but there's very little out there for her budget (which would be £370,000 I suppose - There are only 4 houses for sale in our home town below that figure) - She may well have to move, but while living in a larger house she has the opportunity to rent out two rooms for £1,000/month which is helpful.
So our main aim is to try and keep here there as long as possible.
Huh?We have looked briefly at smaller/cheaper properties but there's very little out there for her budget (which would be £370,000 I suppose - There are only 4 houses for sale in our home town below that figure) - She may well have to move, but while living in a larger house she has the opportunity to rent out two rooms for £1,000/month which is helpful.
So our main aim is to try and keep here there as long as possible.
The two rented rooms just pay the mortgage interest and she is still effectively down to a one bed house because you cant stay in the box room.
It all seems to be down to location.
Change location.
romeogolf said:
4) Mum pays about £1200/month on mortgage but can afford £1500
5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
Doesn't the £2k pcm maintenance from the Ex cover the mortgage?? If there is 9 yrs to go and maintenance for 13 years, why not just leave it as is??5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
jimi said:
romeogolf said:
4) Mum pays about £1200/month on mortgage but can afford £1500
5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
Doesn't the £2k pcm maintenance from the Ex cover the mortgage?? If there is 9 yrs to go and maintenance for 13 years, why not just leave it as is??5) Mum receives maintenance from my dad for next 13'ish years (approx £2k/month) and rents out a bedroom (£500/month) - Have considered renting out a second bedroom for around the same. Smallest bedroom is too small to rent out, otherwise she may have done that too.
The plan now is for her to rent out the second room for £500/month and pay £2,000/month on the mortgage. She's now paid off a £55,000 lump from the shares mentioned above so interest-only the payments are sub-£1,000.
Assuming no interest rate rises this would pay the loan off in 14 years, but we know that's not going to be the case. She'll chip away at it for 2-3 years and then when the rate kicks up, sell the place and buy what she can with the equity plus whatever the banks will lend her at that point (likely £80k if she's lucky). It's hit home to her that she really does need to put every last penny into the mortgage right now for her long-term benefit.
Ultimately this is the type of house she's wanting to down-size into, so she needs £300k of equity to make it realistic/possible.
romeogolf said:
Current mortgage is interest only (£300,000 @ 4.74% = £1185). In 9 years she'll need to sell up to pay it off.
The plan now is for her to rent out the second room for £500/month and pay £2,000/month on the mortgage. She's now paid off a £55,000 lump from the shares mentioned above so interest-only the payments are sub-£1,000.
Assuming no interest rate rises this would pay the loan off in 14 years, but we know that's not going to be the case. She'll chip away at it for 2-3 years and then when the rate kicks up, sell the place and buy what she can with the equity plus whatever the banks will lend her at that point (likely £80k if she's lucky). It's hit home to her that she really does need to put every last penny into the mortgage right now for her long-term benefit.
Ultimately this is the type of house she's wanting to down-size into, so she needs £300k of equity to make it realistic/possible.
So she can already afford that house can't she? So why no buy it now?The plan now is for her to rent out the second room for £500/month and pay £2,000/month on the mortgage. She's now paid off a £55,000 lump from the shares mentioned above so interest-only the payments are sub-£1,000.
Assuming no interest rate rises this would pay the loan off in 14 years, but we know that's not going to be the case. She'll chip away at it for 2-3 years and then when the rate kicks up, sell the place and buy what she can with the equity plus whatever the banks will lend her at that point (likely £80k if she's lucky). It's hit home to her that she really does need to put every last penny into the mortgage right now for her long-term benefit.
Ultimately this is the type of house she's wanting to down-size into, so she needs £300k of equity to make it realistic/possible.
Saving the £2k per month for 9 years is over £200k, investments could most likely bring that up as interest needs to be added. Renting the two rooms at £500 a month each pays the interest only payments for the foreseeable. She's got £20k to live on, plus whatever else she can muster.
Carry on.
Carry on.
Not being an expert in this, and I may have missed it in the thread but... your mum has dumped £55k, of the £60k your dad handed over in shares, into the mortgage on the house he half owns - is that correct? I would imagine he would be pleased that she has reduced the debt for him as well as her with that money. Also she is paying off his mortgage every month as well. All good for your dad. Unless there is some other agreement in place.
SELON said:
Not being an expert in this, and I may have missed it in the thread but... your mum has dumped £55k, of the £60k your dad handed over in shares, into the mortgage on the house he half owns - is that correct? I would imagine he would be pleased that she has reduced the debt for him as well as her with that money. Also she is paying off his mortgage every month as well. All good for your dad. Unless there is some other agreement in place.
I think you've misunderstood. Whilst he is on the title he has signed over his interests in the property to mum (apologies if I'm wrong). i.e. its hers to sell and she will receive all the proceeds.jimi said:
Doesn't the £2k pcm maintenance from the Ex cover the mortgage?? If there is 9 yrs to go and maintenance for 13 years, why not just leave it as is??
I see this point has been addressed already, but this idea, with the circa £80k you think she'll be able to borrow, plus what you'll be able to borrow, and the £1k PCM (potentially) from letting out two rooms; surely you're somewhere near? CBA doing the maths myself...
Or downsize.
BigTom85 said:
SELON said:
Not being an expert in this, and I may have missed it in the thread but... your mum has dumped £55k, of the £60k your dad handed over in shares, into the mortgage on the house he half owns - is that correct? I would imagine he would be pleased that she has reduced the debt for him as well as her with that money. Also she is paying off his mortgage every month as well. All good for your dad. Unless there is some other agreement in place.
I think you've misunderstood. Whilst he is on the title he has signed over his interests in the property to mum (apologies if I'm wrong). i.e. its hers to sell and she will receive all the proceeds.romeogolf said:
AyBee said:
I'm not a mortgage adviser, but could you not replace your dad on the mortgage, giving her the benefit of being able to borrow more and have a lower interest rate?
Sadly not. My income is quite some way off being able to get a similar level of loan - We did consider this.
Gassing Station | Finance | Top of Page | What's New | My Stuff