Advice needed

[solvendie]

We took out a Mortgage 2.5 years ago for my MIL - she put down £35k and we agreed to pay mortgage (additional £90k). At the time we did this she was divorcing FIL and moving back to UK (having lived elsewhere for 15 years). We agreed to take out a mortgage because at the time she was getting an allowance from FIL alongside a £150k payment. We were paying a monthly sum to FIL for a loan which was roughly the mortgage amount.

After about a year MIL agreed a settlement with FIL (without our knowledge) and got a further payment of £150k with monthly payment stopped. FIL at this point seems to have wrapped up our loan payment into this deal. We would have been due to cease loan payment last year but we now have a mortgage for another 12 years!

We were fine with this but we have now discovered that MIL has lost ALL of her money to scammers (cryptocurrency - £90k plus) and has taken on £6k credit card debt.

She has got a job but it looks like she will now be made redundant. She is 64.

We took on the flat in the understanding that she would pay for upkeep. We didn’t want the flat.

Where do we go with this? I want to either charge her rent so that we can afford upkeep or (preferably) sell the flat and give her £34k back so that she has something for retirement.

This is a huge source of anxiety for me and my husband. We recognise that our hearts were in the right place but that we were very naive and have caused ourselves a lot of problems.

There is more to this in that my husband took outa car loan on her behalf which she has been unable to pay Some months but she cannot understand why we can take her car away from her and hand it back!

Do we charge rent, do we sell the flat and make her rent? What is reasonable?

If she gets made redundant and has to claim Universal credit then it may be difficult to get help with the rent if renting from a close relative. You would need to prove that you didn't buy the property purely with the intent to rent to a relative and it will be complicated by her owning part of it I imagine- I do not know the rules here as it's complex but just saying it will be likely that there would be difficulties getting any help from benefit with the rent. If you give her the 35k then she will not be able to claim any means tested benefits if she has capital/ savings over 16k. She could maybe still claim a contributions based benefit like new style JSA for six months. To be honest I think her options are going to be limited. She will need to pay rent from her capital until it drops below 16k so she may need to be mentally prepared that that money may not be around for her retirement. It may be possible to pay some into a pension maybe, to partly get around this, you would need expert financial advice/ pension advice to see where she would stand with that.

Thanks for replying. The flat is fully owned by my husband and I as technically the £34k was ‘gifted’ to us. She is terrible with money and has burned through over £250k in 2 years. She has nothing for retirement other than state pension.

We didn’t want to own the flat - it was meant to be us taking a mortgage for her to pay but as we owed FIL money, instead of paying him so he could then pay us the mortgage amount, we just paid the mortgage. The problem came when we later found out that MIL and FIL subsequently changed their divorce agreement and FIL gave MIL cash lump sum instead of monthly payment. Thus landing is with the mortgage rather than paying off the sum we owed FIL (which would have been paid by now)

I just feel we are now buying a flat we didn’t want to own - tying up money we could better use elsewhere. As MIL has no savings and precarious income we will also be responsible for repair and upkeep - hence wanting to charge rent so that this could be covered.

I would sell the flat.

Then use the £34k on her behalf to get her a rental ie some would go on deposit and first month.

I'd also check that her ni is up to date, for her state pension and pay any missing years. She would be retiring in a couple of years.

I would next pay off the car so she owns it outright and make sure it was the most economical car she could have, changing it if need be.

Then what is left of the £34k, I'd put in a account for her. Maybe a joint account with you and/or a notice account. I'd put a couple of thousand in an emergency account in her name, with instant access (then fingers crossed she didn't access it needlessly)

Then that's it, you would have done what you can for her. When she retires, she can claim for her rent to be paid and get her state pension.

This is what I would like to do. It’s the fallout from this that we are worried about. She feels entitled to us shouldering the mortgage and taking out the loan for the car.

£250K in 2 years
Agreed to pay mortgage
Agreed to pay car
Where has the money gone ?
Has she paid any back ?
That's a lot of money
Do you have any written agreement to pay anything back ?

Why did she need a mortgage & car loan in the first place, if she had 250K ?

It doesn't matter what she feels entitled to.

I would tell her the plan and that she would have some money to aid her retirement and a paid for car but that the worst case scenario would be you forced to sell the flat for a much lower price and then she would end up with not even that.

This is a tricky time and if you lost your jobs that would happen as how could you pay her mortgage then?

I'd get it on the market ASAP due to the rebound prices after lockdown and before the end of furlough scheme, more job losses and end of Brexit transition period. Its only going to get far more unstable from Oct, then worse again in jan.

W1nterSummer20 - she moved here from abroad when she split from FIL so had no credit rating (or technically income as she was on an allowance from FIL). DH took car loan which she would pay. However she spent her first lump sum from FIL and then got and additional (final) lump sum instead of monthly allowance. Nothing left now due to spending and scammers.

Fortunately, both my DH and my job secure but I just see this mortgage/flat ownership getting more stressful. I resent it as this was not the original agreement and we will just be paying for it over and over. DH agrees with me but I think we need to strengthen our resolve!