Which option credit card or mortgage for current debt?

[mosschops30]

I have £1900 worth of debt at the moment on 2 0% interest credit cards. Due to job change i cannot pay these off so i have 2 options. Advice please on what to go for.

Option 1 - me and dh are borrowing £5k on a mortgage for my mothers house which we are buying cash, the £5k is for housing emergencies like boiler breakdown, roofing etc. it will cost us about £20pm interest only until my mother passes away and we sell the house. If i borrowed a further £2k for my debt it would cost maybe £30pm for the duration until house is sold.

Option 2 - i do a 0% balance transfer to another card. I might be able to pay off £50pm max to start clearing, but could do a few extra shifts to help towards.

WWYD?

Bump

How about just borrowing £5000, using £2000 to pay off the credit card, keeping back £3000 and spending a bit of that on house insurance and a coverplan for the boiler? If you're already struggling to find £50 to pay back two credit cards with very small balances, I don't think it's wise to take on more debt on top. Interest rates are currently low but could go higher and houses are not that easy to sell on at the moment.

We will have buildings insurance, but wanted a safety net. We wont live in the house so dont want to be paying a coverplan.

How about a mortgage that you can draw down or pay back as you go?

Its called an Offset Mortgage that 'offsets' any positive balance you have in your current account against the mortgage debt but you can flex the mortgage debt up and down as you need to do repairs etc.

The mortagge rate wil be a lot less than a credit card but check small print for any penalty if you pay off the mortgage completely.

It sounds as though you're buying the property but that your mother will continue to live there. If you're buying the house and not living in it yourself are you aware that there are tax implications for any profits made on houses which are not your primary residence? There may also be inheritance tax issues.

Only if she dies within 7 years. The money is a gift and the house will be ours. Its all being done through our financial advisor.

So credit card transfer or add to mortgage?

Why not ask your financial advisor....?

If you are living in the house and your mother moves out completely so it is really your home then things should be OK if she lives 7 years. However, I think you need to be very very careful with this.

As Cogito says the HMRC looks very very hard at arrangements like this where someone gives a house away but continues to live in it. It is called a Gift with Reservation.

'If you give your home to your children with conditions attached to it, or if you continue to benefit from the home yourself, this is known as a 'gift with reservation of benefit' and the gift won't be exempt from Inheritance Tax, even if you live for seven years afterwards.'

I assume one of the motivations is also to try and avoid having to pay for her care? For this reason, local authorities look very hard at this kind of arrangement too.