Pay off Parents Mortgage

G

GaffneyAM

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My parents are in their 70s, retired and have a mortgage of €40k on their home with
PTSB. The house is worth ~€80k. They have never been in arrears, but struggled to meet the payments after remortgaging in 2007 in their early 60s.
Since then they have been paying interest only & more recently in a split mortgage, this agreement is coming to an end. PTSB have agreed to give them 10 years to pay the mortgage but the monthly instalments are too high for them, the cost of the credit will be 8,000 & life insurance 7,500.

My siblings & I have decided to just pay off the mortgage
now, it has cost so much already. My siblings are not in a position to help financially & I will struggle to raise the 40k on my own. My siblings have agreed that if I pays off the mortgage now, then whenever house is sold in the future, they will pay back their shares. Currently the will states the house will be left to my siblings & I in equal shares & we dont want them to have to change their will.

The plan is
* I will give my 3 siblings a personal loan of €10k each.

*I will send them an email that says something along the lines "I
am giving you a loan of €10k today, You are to repay it to me whenever
our parents house is sold and passed to us via a will etc. You promise
to make a reasonable attempt to repay the loan in the mean time should
you find yourself in a position to do so. Do you agree?"

* Once they agree, I send the money to my siblings, and then all 4
siblings transfer a total of €40k to their parents account which they
can use to pay off the mortgage.


Im just wondering if this is the best way to deal with this situation, has anyone been in this situation that can answer the below questions

1.) Does this seem like a reasonable approach?

2.) Are we correct in saying that nobody will incur any taxes in this?
Its a loan to the siblings, which in turn is a gift to our parents?

3.) Is there anything our parents needs to be careful of when paying
off the mortgage like this?

4.) Is there likely to be any chance of doing a deal with PTSB to reduce the
owed amount in this case? This mortgage started in 1992 for 38K and has been
paid off many times in interest since then?
 
You are making this way too complicated

First of all, your parents have a mortgage of €40k which the lender has agreed to reschedule over 10 years.

What is the mortgage rate? If it's a tracker, then you should not be paying it off.

If the rate is 4%, the repayment will be €400 a month and you should consider just paying this if your money is tight.

You say that the life insurance is €7,500. There is no need for them to pay life insurance. They should just tell ptsb that it is not required. Ptsb might insist on it as a condition of the loan, but if you persist, they will probably drop the demand.

If you do decide to repay the loan, then simply give your parents a loan. Make sure that it is properly documented and signed by both your parents and you. On your parents' deaths, the executor will have to repay the loan to you before distributing the assets.

You could go even further and draw up an actual mortgage. In other words, your loan would be secured on your parents' home and the home could not be sold until the mortgage is paid off.

Your parents might go into a home and the house might be sold and you have a complicated arrangement with three siblings?



Brendan
 
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I wouldnt be relying on the goodwill of your siblings to pay you back when the time comes. Wills can cause no end of grief between siblings no matter how well you all get on now. If you are to pay off the mortgage get proper legal documentation in order before handing over a cent.
 
GaffneyAM said:
I will struggle to raise the 40k on my own
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Then don't struggle. Either pay their €400 a month in comfort, or else raise what you are comfortable with and lend them that.

That might also put a bit of pressure on your siblings to help out at some stage in the near future. If they have the resources, they could lend whatever is left to clear the mortgage.

Brendan
 
You can also have a separate understanding with your siblings. If they come into money, then they will lend it to your parents. Your parents would use that to reduce the loan to you.

Brendan
 
I'd stop the life insurance. What can they do to your parents. That's crazy having that type of costly life insurance on a property because the bank would be paid off if your parents died from the equity in the property.

Straight away there the parents have 7500 to pay to the mortgage. And that should go off the capital immediately. Are they paying the life insurance by monthly instalment? Stop the instalment and tell the bank that the money goes off the capital. If it's an annual payment even better, bring down the mortgage to 32,500K. Same thing next year. Takes 5 years and the loan is cleared, less because they are making some payments as well.

Agree with posters that loaning your siblings is looking for trouble. If you do go the loan to parents route, inform all your siblings in writing and keep a copy. You'd be amazed how these things can cause trouble later. Best of luck with trying to do the right thing.
 
Imagine the idea of a bank taking 8K a year on a loan plus 7.5 K in insurance from elderly people struggling when they could easily cancel the life insurance and structure this much more manageably.
 
The rate is 3.7%, not a tracker. My parents feel very strongly about leaving the house to us in equal shares. So the idea of the sibling loan was to make them feel like we all paid off their mortgage together. Struggle may not of been the right word, I have the money it is my lifes savings but have no immediate use for it. That is good to know about the life insurance, it is shocking how much money they have spent on it so far.
 
Then structure the loan so that your parents pay it off to you. You pay the 40K via a loan to them. Now they don't have either mortgage or life insurance and they pay you something like 10K annually - an amount that means they don't struggle at all. If this is not done all the siblings lose out as the inheritence will be heading for less than 40K out of the 80K presently if no capital is being paid. And all the money wasted in life insurance and interest solely.

Do you mind my asking how they ended up in this situation. And I agree about the money being washed down the drain so far.
 
GaffneyAM said:
My parents feel very strongly about leaving the house to us in equal shares.
Click to expand...

Then let them pay their own mortgage.

This is the type of irrational thinking you get which could come back to bite someone like yourself who is trying to do the right thing.

All you need is one thick brother or sister saying: "I want my 1/5th share" and they will be to thick to understand that your parents did not own the house outright.

Brendan
 
Bronte said:
And I agree about the money being washed down the drain so far.
Click to expand...

What?

They paid interest on the money they borrowed. That is normal.

They paid insurance so that if they died the mortgage would be paid off. That is normal.

That is like saying I have washed the car insurance premium down the drain for the last 20 years as I never claimed.

Brendan
 
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