£50,000 Personal loan to help parents pay off mortgage

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Good Evening,

My parents have a house which they will give to me in the future (next 10 years in writing will). They have some savings and need another £50,000 to pay off fully the mortgage. I am willing to take out the £50,000 loan over 8-10 years as this will be my house in the future and it saves me a lot of money in the long run. The lender said they need to find £50,000 within 6 months where their mortgage term ends or they will be forced to sell the house which is not ideal as the area is really good and could easily double in the next 10-15 years.

Are there any banks that give personal loans without asking for the reason? Can you use it for other debt consolidation such as this case. My salary is around £35k.

I don’t think you can claim housing benefit when you own a house worth 100s of thousands. Equally if you gift it away you won’t be able to claim it.

Just no. They didn't make provisions for this. You could pay £50k off and they could sell and you'd be out of pocket. Just no. Do not do it. They can sell and downsize.

Are you just pulling this out of your imagination?

www.citizensadvice.org.uk/benefits/help-if-on-a-low-income/housing-benefit/help-with-your-housing-benefit-claim/check-if-you-can-get-housing-benefit/
You can’t get Housing Benefit if you or your partner pays rent to:

a parent of a child who lives with you
an ex-partner, for the home you used to live in together
a close family member who lives with you
You might be able to get Housing Benefit if you pay rent to:

a close family member who doesn't live with you
a friend or more distant family member like a grandparent – even if you live in the same home
someone who used to let you live in the property rent free
To get Housing Benefit, you’ll need to show the council evidence it’s a ‘commercial’ rental agreement – like one between a housing association and a tenant. For example, they might ask to see your contract or proof that you’re paying rent. They might also ask for other evidence, like a deposit you paid when you moved in or a gas safety certificate from your landlord.

Your local council might decide you’re not eligible if they think you’re only paying rent to get Housing Benefit – this is called ‘taking advantage of Housing Benefit’. It might be taking advantage if for example you’ve been living with a friend and have only just started paying them rent.

Do you always just make up answers? I would hate to have to work with you.

Again. The council will pay housing benefit to a landlord.

People can be landlords.

SOMETIMES THEY ARE RELATED. IT'S NOT ILLEGAL.

Sounds a terrible idea to me. Go see a financial advisor.

ask for legal advice

No, it's not possible as a mortgage is based on your income and lenders do affordability tests.

Buy to let is on the rental income but if you are intending to rent to parents then some lenders will want to do it on your income. A good broker will tell you which lenders do which.

Capital gains tax only triggers when you sell a property that isn't your main home.

Stamp duty will be calculated in fair market value if your parents gift you a proportion of the value

This is all quite above board. I've linked a broker up thread.

I have literally done exactly this for a family member. The mortgage is with nationwide building society.

Op GET LEGAL ADVICE

You don't say where you are, ie, Scotland, England, etc.

Are. You an only child.

Do you hold a power of attorney.

It's really not as simple as get a loan and pay it off, as others have said.

Life rent is an option. Is the house important? Or are you focused on a future unknown? Ie you get hit by a bus then what.

Both they and you need independent advice, but it is great you have started to think about it now.

A 50k loan will need to be secured for a start.

You are highly unlikely to get a 50k loan on your salary unless you have substantial equity in your own property

You need to seek out proper legal and financial advice regarding this - not asking randoms on MN etc.

Don’t do it OP. We’ve been through this recently and spoke to 2 solicitors and a financial advisor that we trust.
even if you are eligible to take out a mortgage for £50K, most mortgage companies won’t allow a close relative to “rent” it from you. You need a special vehicle mortgage to do this and the interest rates are eyewateringly high. You can’t get a personal loan for a home, that’s what mortgages are for. This type of mortgage is also quite hard to be accepted for as you need to demonstrate you have sufficient savings/cashflow to pay off the mortgage yourself. You need to be cash rich for it.

If parents gave you the house, this could be seen as deprivation of assets and you may be liable to pay care fees for them. That’s if they have to move into a care home or if they need careers help in their own home. They would also not be able to access any housing benefit or pension credit. They sound like they are not financially sound so they may be relying on state benefits in older age which they won’t be able to access if they did this.
additionally, if they gave you their home or a share in it to cover the £50K, you would need to pay higher rate stamp duty tax (if you own your own home), or if you rent, you will need to pay the higher stamp duty when you buy your own home. You would also be liable to pay capital gains tax when you come to sell the property in the future. If you take out a buy to let mortgage for the £50K, most lenders expect market rent to be paid to you, and if you are either not accepting rent or it is below market value, you are unlikely to be accepted for a standard buy to let mortgage and hence would need the special vehicle mortgage.

I forgot to add- the simple answer is to get financial and legal advice. And then your parents should sell and downsize

Down size rather than equity release. Equity release will see you with nothing

I do know how mortgage work thanks. She still needs legal advice, you can also be gifting money and have to declare it.

Even if they do gift it to you, the local authority will look at that gift if they need care, and possibly take it to court under “ deprivation of assets”, eg your parents deliberately gave away their home to avoid care home fees - unless they actually moved out into alternative accommodation.
similarly, if they gift you the house , and last one dies within 7 years you’ll need to pay off any IHT due. Theoretically this comes from your parents estate, but if that’s been gifted up to 7 years earlier, the person it’s been gifted to will need to stump up the amount and before probate can be given.
life this house will be an additional house for you, there are also massive capital gains tax implications

so, I’d strongly advise you to take legal advice before doing anything.

Terrible idea OP.

How did they plan to pay the capital borrowed? This was always going to happen and they sound like they hadn't really thought it through, now making more foolish plans.

This is not a wise financial plan. In fact it’s downright foolish.

there are very good odds that your parents assets, including the house, will go entirely to their personal expenses, including care fees during their lifetime.

even if they don’t use all of their assets, a will is not a guarantee. They could change it at any time and give the house to whoever why choose. One of them might even die and the other remarries and gives the house to the new spouse.

You can think these scenarios are unlikely, but are you willing to be 50k plus interest on that?