# In-laws in a mortgage mess



## sexitoni (23 Feb 2013)

This is a bit of a long story and if the like is covered elsewhere I apologise - I did a search...


My in-laws have got themselves into a terrible mess with a mortgage... I'm putting in all the facts as best I have them. Any advice on what my in-laws can do would be appreciated:

In 2006 my wife's brother was in the process of buying a home for about 300K out in the middle of nowhere in rural Cork, near his wife's family, when the mortgage application ran into a problem. The story was they couldn't get mortgage protection because his wife was in remission from cancer and so the sale was going to fall through.

The brother-in-law went to his father, my wife's father, for help. The father had cleared the mortgage on the family home a year or two earlier, but had no real savings. So the son asked him to remortgage the family home, and use the money to buy the son's house. The plan was supposed to be that the son would make the mortgage repayments and would then buy out the father altogether a few years later when they had built up more savings and mortgage protection would no longer be an issue.

Yeah, I know...

So the father was given a 15-year re-mortgage (because he was 55 at the time) and bought the house the son wanted. They then went interest-only for an initial 3-years. The interest-only repayments came out of the father's account, and the son reimbursed him each month. 

As the three years was drawing to a close it was obvious the son was in no position to get his own mortgage - they had often been late with payments as it was. For good measure his wife lost her job, or was fired, in the meantime and hasn't worked since, claiming that she has an unspecified sickness. So the family kept kicking the can down the road and arranged extensions on the interest-only payments right up until last October when the bank (Ulster Bank) finally refused to extend any further.

So this is the mess: My father-in-law now owes the full principle on the son's house to the bank, to be paid over 8 years. He's 62 and still has a well paid job, but his employers want him to retire and the bank are eyeing up his retirement package. He has cancelled the direct debit and is now manually making the equivalent of the interest-only payment. A guy from RBS rang him yesterday to tell him he's now 6K in arrears.

The house has been valued by an Estate Agent at 200K. The son has a combined salary and BIK of about 50K (I think). We have no idea what their financial situation is otherwise - a combination of hoping the issue would go away and relationship breakdowns means getting all parties to have a calm, frank discussion has so-far been impossible. My wife's brother resembles an ostrich, refusing to answer phone calls, hanging up the phone or ringing his parents drunk and in tears late at night. My in-laws are still afraid to push too hard because they're afraid he might do something stupid and they also think there's more went on back in '06 than has ever been admitted. 

They have tried to talk to Ulster Bank about some kind of restructure, and have hired a solicitor to help them, but the bank seem to be pretty obtuse (maybe you can't blame them - but the bank employees have even failed to keep the appointments they made themselves and more than once one of my in-laws has been left sitting waiting for someone who hasn't showed up!). 

So my in-laws went from being debt free at 55 to all this at 62 to help their son and now they're very frightened. Obviously if they could go back in time...

The ideal would be for the son to somehow still buy the house, even for, say, 260 K and the in-laws would be prepared to suck up the rest to make it all go away. But there appears to be no chance he'd get a mortgage for anything of the sort. 

I was thinking maybe Ulster Bank bank would look at the fact he has paid 1100 euro odd a month for 6 years and could be given a 30-year loan, for example, to buy out the parents 8 year loan?... Better than repossession?

Anyway any ideas at all would be great. I'll try and answer any questions as best I can.


----------



## RichInSpirit (23 Feb 2013)

Hi there !
I'm not qualified to give financial advice but, given that you said -
"I was thinking maybe Ulster Bank bank would look at the fact *he has paid 1100 euro odd a month for 6 years* and could be given a 30-year loan, for example, to buy out the parents 8 year loan?... Better than repossession?" 
I'd let the bank take you to court and fight them as best you can in court. I think a judge would look sympathetically at the fact that they are making a continuing substantial repayment.


----------



## Vanilla (24 Feb 2013)

Does your father in law own both houses? With a mortgage on just his own house and the other house debt free?


----------



## Brendan Burgess (24 Feb 2013)

> but the bank seem to be pretty obtuse (maybe you can't blame them - but  the bank employees have even failed to keep the appointments they made  themselves and more than once one of my in-laws has been left sitting  waiting for someone who hasn't showed up!).


I am missing something here. This case is very simple.

A high earning individual with a mortgage-free house remortgages his home to buy an investment property.
He is on interest-only for three years by agreement.
The "obtuse" bank has rescheduled this investment loan a few times, but now wants him to make the full capital and interest payments. 


> My father-in-law now owes the full principle on the son's house to the bank,


Eh no. The father-in-law owes the full principal on _his own_ house - this is not the son's house.  The son appears to be a tenant from your description.



> He's 62 and still has a well paid job, but his employers want him to retire and the bank are eyeing up his retirement package.


He is very lucky in that this retirement package will get him enough money to clear most of the negative equity. He can then sell the house and repay the mortgage. 

While I have sympathy for him, for the unwise investment he made some years ago, he can't blame UB for that. 


> They ...have hired a solicitor to help them


What is the legal issue involved here? It sounds as if he is just simply going to make his financial position worse by paying legal fees. 

He borrowed money. He can afford to repay it. He should repay it.


----------



## dub_nerd (25 Feb 2013)

Does the father-in-law now also have a tax liability, since he has been letting an investment property to the brother-in-law?


----------



## SarahMc (25 Feb 2013)

The main issue here is the in laws have a tenant in place, with no lease, who is consistently late or absent with rent.
That's what they need to deal with. 
If the house is worth €200k, the son is not going to get a loan or mortgage for €260k.
They need to decide if they are going to sell the house, and face the fall out, or act like landlords and face the fall out.

There are no other options.


----------



## Bronte (25 Feb 2013)

Why is the mortgage in arrears?  Can the father not afford the repayments.  

We await your replies on ownership but if the father owns the house I recommend it be sold, the mortgage repaid and the NE paid out of the retirement package or arrange with the bank that the balance be paid off at the same term and interest rate as the current mortgage.  

The son should then make an effort to repay his father at a mutually agreeable rate.  Or the father writes it off.  

If the father is not willing to sell the house than he may be unwillinging to tackle the problem but it is not going away.  Heads need to be knocked together.

Advice to you as a son in law, stay out of it.  Grief is all it looks like.


----------



## Kev (25 Feb 2013)

Bronte said:


> Why is the mortgage in arrears?  Can the father not afford the repayments.
> 
> We await your replies on ownership but if the father owns the house I recommend it be sold, the mortgage repaid and the NE paid out of the retirement package or arrange with the bank that the balance be paid off at the same term and interest rate as the current mortgage.
> 
> ...



  It is interesting to note that it is only the son's father that has been approached for help and not the wife parents therefore why have they stayed out of their daughter housing predicament. Why is it only the husbands parent(s) that has only been asked to help, if all the parents were to help then that would make it much fairer to all concerned. 

If the husband father writes off the debt then he will be left with a huge debt just for helping his son and his wife out and surely that is not proper or right.


----------



## sexitoni (26 Feb 2013)

Apologies for any lack of clarity before, and picking the wrong forum.

The "son's house" is of course the father's property - I was just trying to differentiate between that house and the father's home in the story.

Yes the son is a tenant, with the rent set to cover the interest-only payments and other expenses. It's all above board tax wise afaik.

They are in arrears on the principal since the November payment, when the interest only ended. The full repayment is now something like 4K a month. 

There is no problem selling the house now, but the NE will wipe the father in law out. It will take all his retirement money and most of his pension until he's 70. They'll have to sell their own modest home as well as the "son's" to avoid that, and use any remaining money to find something small to live out their years. At least the property price drop means that seems doable. My wife and I are in a small house and in no financial position to help either.

It is fully understood that this is their debt and it needs to be paid. What we have been hoping for is that there is some way of making the debt repayments more realistic than the full mortgage amount over 8 years. 

The bank have been obtuse, Brendan, in making appointments to discuss the issue, not keeping them, and then scaring 60-something year olds with phone calls from Scotland. Maybe obtuse isn't a great word. But it's unpleasant. They are not looking for any writedowns, write offs or anything. Just a way of making the debt manageable, which appeared to be some way of allowing the son take over the debt over a longer term i.e. buy the house for somewhere below the original price but above the current valuation, and using the retirement money to clear the remaining NE. Furthermore it was not an 'investment' it was a father going out on a limb to help his son buy a home.

They have already filled in all the forms about their monthly outgoings etc so the bank can dictate to my mother in law how often she's allowed get her hair done. I'm sure all the big guys with massive debts to the banks go through similar humiliation. The solicitor helps them in correspondance with the bank, seeing as no manager ever shows up to talk to them.

The wife's father has passed away and mother would have nothing. I'm not sure how her siblings are fixed. Relationship breakdowns have meant the conversation never made it that far.


----------



## sexitoni (26 Feb 2013)

One thing i left out is that the in laws didn't come up with this wheeze on their own, it was an Ulster Bank mortgage adviser who suggested it to the son in the first place. The mortgage 3 years down the line for the son to buy out the dad was supposed to be a formality. Of course there's nothing in writing, so I didn't mention it before.


----------



## Kev (26 Feb 2013)

sexitoni said:


> One thing i left out is that the in laws didn't come up with this wheeze on their own, it was an Ulster Bank mortgage adviser who suggested it to the son in the first place. The mortgage 3 years down the line for the son to buy out the dad was supposed to be a formality. Of course there's nothing in writing, so I didn't mention it before.



I do not understand this...was the son trying to buy the family home?  Has  the son and his wife got a home of their own on a mortgage?   

OR did the son asked his father to borrow money on the family home to help him buy a home for himself and his wife?  And the money has all gone and the father is bearing the brunt of this for helping his son ie debt collector are putting the frighteners on the father to pay back the money that he borrowed to help his son? 

Dose the wife mother own her own home?

Is any of the above correct.


----------



## sexitoni (26 Feb 2013)

The second one - father remortgaged his home to buy a second house to be his son's home, when the son's mortgage application for that house ran aground. Plan was to rent house to son for three years until son could get mortgage and buy house off the father. Idea proposed by son's mortgage adviser when original application ran aground on his wife's life insurance.

The father could only get a 15 year mortgage, first three interest only, Now son can't get a mortgage and price of property has collapsed while full principal of father's loan is outstanding with 8 years left.

Wife's mother lives along with an unmarried son in a small townhouse. What idea were you going to have there?


----------



## TableEnd (26 Feb 2013)

but the father owns the son's house he didn't hand over value to son so son has house in his own name. What is remaining balance on mortgage? could FIL sell home for 200k and offset it against what he owes now. Let son sort himself out?


----------



## sexitoni (26 Feb 2013)

Val_Ally said:


> but the father owns the son's house he didn't hand over value to son so son has house in his own name. What is remaining balance on mortgage? could FIL sell home for 200k and offset it against what he owes now. Let son sort himself out?



That's what he's facing, and the remaining balance is all of it. it was interest only for the first few years until the son could buy him out. Now he'll get 200K if he's lucky for the second property, but the original loan was 320 or 350, not sure which, so he's looking at a fair bit of NE to suck up at 62 on the verge of retirement. 

He's not a wealthy man, he'll be left with next to nothing after 45 years of work. Paid high interest rates and high PAYE during the 70s and 80s; full college fees for his three kids etc etc like so many others. Kids had grown up, he had cleared all his own loans at 55 and had no intention of trying to enrich himself with buy to let or foreign property developments. He tried to help his son and it has blown up in his face. I posted originally because it's just so sad for him and i and my wife can't help. I was hoping someone knew of a precedent for loans being transferred to children and extended to make them manageable.


----------



## Brendan Burgess (26 Feb 2013)

If the son had bought the house as originally planned, he would now have a mortgage of €320k on a house worth €200k.  

Is the son able to make any repayments on the €320k mortgage? 

In law, the son is a tenant.  In spirit, the son owns the house and owes the mortgage, but this would be totally unenforceable. 

The father and the son need to sort this out between them.  I don't see it as UB's fault.  They have a well secured loan. 

My only suggestion would be that the father puts his retirement lump-sum against the mortgage but asks UB to treat it as payments in advance. With rent from the son, they may manage to reduce the value of the outstanding mortgage to below the property's value after 8 years.


----------



## Kev (26 Feb 2013)

I have seen this happen before and it did not end very well for that son parents either (it seems to be the same scenario with your wife’s parents home).  Not surprising the wife I knew of put the onus for getting a home for them on her husband’s parent(s), despite her parents having a mortgage free family home.   However, in that case a deed of trust was drawn up that protected the home of the parents, but it still caused a lot of conflict between son and parents.  I am sure your wife brother case is entirely different.  

  As mentioned the house belongs to the father and he has run out of money to pay for both homes.  I can only suggest that your wife brother contacts the solicitor that acted in the conveyance of the second home and see what s/he suggests. 
  It was thoughtless, on the son part,  not to have some sort of a deed drawn up and signed by both parties during the conveyance in order to safeguard his dad home. 

  As for the phone calls to your father in law, his son should deal with them by writing to the company that is making the call informing them that they would be classed as harassment if they continued to keep making calls to the father and for them to stop forthwith. Also,  inform them to put everything in writing from now on, and if they do not comply then make an official complaint about them to the relevant organization. 

The son should draw up payment plan for his father to send to the bank on how to repay them also send them an come  and outgoings and what disposable income left over to make payments to them, it does not matter how much it is, but make an offer to pay, with the rent from his son and wife it should be substantial amount and see what happens.


----------



## Brendan Burgess (26 Feb 2013)

Kev said:


> As for the phone calls to your father in law, his son should deal with them by writing to the company that is making the call informing them that they would be classed as harassment if they continued to keep making calls to the father and for them to stop forthwith. Also,  inform them to put everything in writing from now on, and if they do not comply then make an official complaint about them to the relevant organization.
> .



This presumably is the lender asking them to make the repayments. They are not harrassment, from the sound of it.


----------



## Kev (26 Feb 2013)

It maybe possible to have a legal Deed of Transfer drawn up with a Deed of Variation by a solicitor to have one of the property transferred over to the son and his wife with the mortgage attached, if both of them are earning it may be agreeable with lender also.  Why not asked a conveyance solicitor about this. It is worth checking this out for your wife's dad sake.


----------



## sexitoni (26 Feb 2013)

Brendan Burgess said:


> If the son had bought the house as originally planned, he would now have a mortgage of €320k on a house worth €200k.
> 
> Is the son able to make any repayments on the €320k mortgage?
> 
> ...



That's a new idea, I appreciate that.

The son would have been able to make the payments on a 30 year mortgage for 320, but obviously not the 8 year mortgage it has become.


----------



## sexitoni (26 Feb 2013)

Kev said:


> It maybe possible to have a legal Deed of Transfer drawn up with a Deed of Variation by a solicitor to have one of the property transferred over to the son and his wife with the mortgage attached, if both of them are earning it may be agreeable with lender also.  Why not asked a conveyance solicitor about this. It is worth checking this out for your wife's dad sake.



That, without having the technical understanding, is what i have been suggesting. Apparently the lender isn't agreeable as they see the current set up as more secure from their point of view i.e. the father's retirement & pension. I think they should push for that, though.


----------



## Kev (26 Feb 2013)

You will need to enlist the help of your TD with the bank, and you must make a good case for the bank to make the transfer over as it is affecting your father in law health, also it would make more sense for the bank refused to entertain a Deed of Transfer of the mortgage over to young member of the family that are working and has the years ahead of them to pay the mortgage.  You father in law retirement and pension fund is for him and his wife to retire on, as they will be not working anymore.  

Has your father in law bank said that they will not make the transfer over to the son?


----------



## Bronte (27 Feb 2013)

sexitoni said:


> They have already filled in all the forms about their monthly outgoings etc so the bank can dictate to my mother in law how often she's allowed get her hair done.


 
I can understand your anger, and indeed it is a fine mess but it is not the banks fault.  Your father in law knew what he was doing.  The anger is misdirected.  Why is it the father in law is worried about this, his wife is, you and wife are and yet it's you trying to get advice.  

Is the son feckless, because that's the picture you're painting.  And sorry to be blunt but people really need to figure out what their family members are and only then can you deal with this properly.  If he is feckless then there is no point in trying to come to an arrangment with him.  Instead the father in law should concentrate now not on what he has lost but on what he can sort out going forward.  Otherwise this will just eat the whole family up.


----------



## sexitoni (27 Feb 2013)

I don't think it's the bank's fault at all, despite this set up originally being the suggestion of, and signed off by, a bank employee. The only anger is the 'computer says no' attitude of the bank to two people who want to pay their debts but need more time to do so.

The son and his wife are the subject of the ire, for causing this mess but in the world of 2006 he would have got a mortgage fine - sure he had been approved at the time. The life insurance was the problem. Like many others he didn't predict 2009 was going to be as it was. He would still like to buy his home, he's facing being turfed out as it is.

Everyone is trying to help. The best advice my FinL has had is to flog both houses and downsize. Asking the good brains of askaboutmoney is all I feel able to do.

Kev I'll investigate all that, very interesting - appreciate the idea


----------



## wbbs (27 Feb 2013)

It's an awful mess to be in.  The ideal solution is for the mortgage to be transferred to the son but I can't see the bank doing that. 

I wonder about the initial difficulty that caused this, there is no reason why the original mortgage should not have gone ahead in the son and wife's name, her inability to get mortgage protection would not have caused the loan to be refused, a waiver could have been signed, UB were always willing to accept waivers.


----------



## Brendan Burgess (27 Feb 2013)

Hi Toni

From UB's point of view, they have an 8 year mortgage to a borrower who has a principal private residence which is mortgage-free, a lump sum coming to them, and a good pension. 

You are wondering if they would transfer this mortgage to a borrower who appears to be feckless and who has a much lower income. 

They won't do that.  And they should not be criticised for not doing it.

I don't think you should waste your time looking to UB for a solution. Look to your FIL's lump-sum and his son's income. 

The son can apply for a mortgage in his own name and buy the property from your father in law. That would be the best arrangement. AIB is the most active lender at the moment. 

Brendan


----------



## Bronte (28 Feb 2013)

Can we have ALL the figures please. 

On both properties.

The 'son's' house is worth 200K.  If one were to repay the mortgage now it would be apparently 4K a month you mentioned (so 4 X 12 X 8 = 384,000).  We need to know the dad's salary/pension/lump sum etc

If the son left the house how much rent is achievable.  Is the son paying anything, when did he last pay anything?  Will he leave the house without a fight?


----------



## cremeegg (6 Mar 2013)

Just a side point about the pension lump sum.

As far as I know a creditor cannot take pension assets. The F in L might be well advised not to take the lump sum element of his pension when he retires.


----------

