Paying my parents' mortgage for them

H

HKB

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Hi Everyone
My parents have a property which is probably worth about 110-120K. They have a mortgage of approx 60 K which has 7 years remaining. They have been unable to pay the mortgage fully for the last 2 years and have amassed arrears of 5500 approx. One has retired and one still works and they have no ability to be able to continue to pay the mortgage. I as their son have paid the mortgage these past 10 months. As far as I am aware the lender has now chased them for the arrears and they agreed with the lender to add these to the total balance increasing their monthly payments from 810 to 905. They are on a tracker rate with BOI.
I have some savings approx 25K which I am prepared to pay off this mortgage for them. Would this be a sensible thing to do? I am sure there are people here who have some similar situations or experience. I know there would b all sorts of issues as regards tax etc and inheritance as they are leaving the house to me. I am currently abroad earning good money and probably within the next 18 months be in a position to pay off the rest of the balance. Just after some advice
Many thanks in advance
 
What about them going interest only and the bank taking what they are owed when your folks die? I know a few people abroad who do this but in Ireland there is such a hang up on inheritance that it doesn't seem to be done.

Like I say to parents who try to help out their kids, I will say the same to you, don't put your own financial future at risk. If you pay off your parents mortgage, what position will it leave you in? do you want to buy your own home? Are there other things you will need money for in the near future?

I understand that you want to help your parents and well done for doing so but I would exhaust all avenues with the banks before using your own money.


Steven
www.bluewaterfp.ie
 
To be honest all avenues have been exhausted. I feel the bank are putting the pressure on as the house is worth more than the debt so they would have no trouble recouping their money. This is the last resort I am afraid. I just want to get this paid and wondering what the best way to do it is
 
In my opinion, 25k is a small price to pay for the peace of mind of your elderly parents.
If they lose their home to the bank, what happens to them then?



However if you do help them, they should be giving you some legal holding on their property for when they pass away.
 
I would say, go to the bank and see will they do a deal for a lump sum to pay off the lot. Explain that your parents cannot pay them and that you're their only option if they want something back. Your bank manager won't have much power, but he'll pass on your request and you never know. Publicly they're not doing deals, but deals are being done.
 
Folks

You must look at this from the lender's point of view.

  • Plenty of equity
  • Cheap tracker
Why on earth would they write off any debt? They will force the parents to sell the house and pay off the loan in full. That way they get rid of a cheap tracker as well.



HKB


You should not use your €25k to pay a lump sum off the mortgage. There is no advantage to this as your parents will still owe €35k and will still need to make repayments.


So you should just use the €25k to pay the mortgage repayments for them. The €25k will meet the full repayments for the next two years. You will probably be in a position then to continue the repayments.



I think it's well worth "putting your future at risk" to help your parents keep their home and tracker. You are doing the right thing.



You should do a formal written agreement with them, specifying that these payments are a loan to them. This makes it quite clear what you are doing and I don't think making such a loan would have any tax consequences for either of you.


Having said that, you can gift your parents up to €30,000 each without incurring a CAT liability.



But a loan is cleaner and clearer.
 
If you paid just the arrears and maybe a bit extra it would completely remove the danger of repossession and bring back the monthly payments to the original or lower level which might be more affordable for you. While holding onto most of your lump sum and benefitting from a tracker mortgage.
 
I have assumed an interest rate of 3.7%, 7 year term and debt of €65,500.

If you pay €25,000 in as a lump sum, the monthly repayments on the €40,500 will reduce to €546 per month. Would that be at a level your parents could afford? Or are they in a situation where they can't afford any debt repayments at all?


Steven
www.bluewaterfp.ie
 
HKB ; re Stevens comment.

Parents shortfall over 24 months = 5500 .ie they are short 230 each month.
Add in extra ie 810 to 905 .ie they are short 95 each month
...........................................................................................
From your note ongoing monthly shortfall is Now this 325 each month.
You have 25,000 .
.........................
If you pay the 325 each month your 25,000 covers 77 months .

Means you risk 325 each month not 25,000 at one go.

You will effectively have mortgage of 84 monhs paid.

You are 100% correct to help your parents.
......................
Maybe the above does not suit you or them but from what you write there is a satisfactory solution within the figures to take stress from parents get Mr Bank paid and not jeopardise you.
 
Thank you everyone for your advice and replies. I think that I am best to transfer the money to cover 1 years payments as the above poster said it means I am not using the 25K.. Its just the fact that at their age I don't want them to worry any longer.. As regards loans and stuff they are leaving the house to me anyways so I dont have any issues there.. I just dont think there is a possibility of doing a deal with the bank because all the discussions my parents have had with them have been pretty much one way traffic to be honest.. My ideal scenario would be for me to gift them the money to avoid tax liablities and for them then to leave the house to my 3 children which I think they can do..
 
Your parent's net wealth is €60k ( €120k - €60k mortgage)

If you lend them the money instead of gifting it to them, then there will be no tax consequences.

If you gift them €60k over 7 years, you are using up your €30k CAT allowance.

Then they will be giving you back a gift of €120k.

If you lend them the money and they leave the house to you, they will be giving you a gift of the value of the house, less the money they owe you, so it will be a lot cleaner.
 
Do you have any siblings that could make a claim on the house or inheritance? if the answer is yes, however unthinkable, best to deal with it on the assumption that house will be shared by them in the will... that means the loan rather than a gift is even more sensible.
 
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