Mortgage Difficulties

Posted on 17 April 2011 by Keith


Property is worth £170000, mortgage outstanding is £65000 over 6 years. My wife and myself are on the mortgage. Our daughter is 25 and lives with us. If we get into any difficulties, what options do we have?  Can daughter take on remaining mortgage?  Many thanks.

Keith,

I recommend that you speak to your mortgage lender before you get to the stage of having difficulties meeting your repayments.  They have a duty to help borrowers with payment difficulties and have various options open to them to ease the pressure on your finances.

The options they may consider include extending your mortgage term, accepting interest only payments, adding another party to the mortgage or a transfer of title subject to mortgage.

Depending on your ages there may be little scope for extending the mortgage term.  However, because you have only 6 years left to repay a debt of £65,000 even an extension of only 2 years could have a drastic effect on the monthly payments if you have a repayment mortgage.  The amount you pay overall would increase because of the extra time but you monthly outgoings would decrease dramatically.

Reducing your payments to cover the interest only is only any use if you have a repayment mortgage, but again would cut your monthly payments.  You need to be aware though that in 6 years time your bank will be expecting the mortgage to be repaid in full and unless you have savings or investments it could mean having to sell your property and downsizing.

With regards to your daughter there are two ways she could help you.  Some Lenders will allow mortgages in more names than the title of the property and your daughter could be added to the mortgage and assume responsibility for meeting the monthly payments.  She would not have any claim to the property and I would recommend that you all took independent legal advice before going down this avenue.  Your daughter may not like the idea of having the debt but no claim on the property! Finally, she could either join you on the title deeds or take over the title completely and have the mortgage transferred to her name.  This could be with your current lender or a brand new lender.  Either way she would need to meet the lenders criteria and there would be a vetting procedure to get through.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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