How do I swap houses with my mother?
November 17, 2013 11:32 PM   Subscribe

My mother has suddenly got into a position where she cannot afford to keep up payments on her mortgage since retiring. The amount left she has to pay is £14,000. I have a mortgage of £72,000 left to pay on my own house. How do I go about tacking the £14,000 onto my own mortgage and swapping houses so she lives in my place mortgage free and I have her house with an increased mortgage? (Bonus points for a super easy fix for all this!)
posted by aqueousdan to Work & Money (12 answers total) 1 user marked this as a favorite
Why can't you just pay her mortgage payment for her, while you live in her house and she lives in yours? Do you need a loan with a lower payment?
posted by yohko at 12:11 AM on November 18, 2013 [3 favorites]

I'm not sure how it works on your side of the pond, but on this side if the appraised value of my home was larger than the principle I owed I would refinance the loan for my home mortgage for £14,000 over the £72,000 I owed, so my new mortgage would be £86,000, and I would pay that new amount every month. That way my mom could stay where she's at and I would be amortizing the £14,000 over the new term of the loan (30 years, 15 years, etc)
posted by Annika Cicada at 12:39 AM on November 18, 2013 [3 favorites]

yohko's answer is the most obvious and has the least overhead, unless your mortgage rate or term means adding £14k to your mortgage would have a far lower monthly impact than paying the existing £14k mortgage.

If you start getting into doing an actual transfer of the properties, you will want to seek professional advice, as there are a few things to get right. For example, if you structure a property transfer properly as a gift, you may not have to pay any Stamp Duty, but you would want to be sure to get this right to avoid a huge bill.

Another option is for your mother to negotiate with her mortgage provider to extend the mortgage term to reduce the payment to something she can afford on her income. There may also be a rationale for you to take out a long term personal loan for the amount if you're going to eventually inherit the property anyway.
posted by wackybrit at 1:13 AM on November 18, 2013

(I forgot to add that I would get a 14 thousand pound check and pay her mortgage off)
posted by Annika Cicada at 1:24 AM on November 18, 2013

Yohko's is the most straightfoward approach and you can then decide who lives where as you see fit. One word of warning though - you need to think carefully about the inheritance tax implications of who owns what property and also the capital gains tax implications (no cgt on home property). You'd be well advised to speak to an Independent Financial Adviser before going ahead...
posted by prentiz at 1:45 AM on November 18, 2013 [1 favorite]

If you plan to formally take title to her house, and to legally absolve her of the mortgage debt, then really you talk to a lawyer and an accountant. There are legal and tax issues involved that no one posting here can address. Legal issues like this require professional services

If you just want to help her out, then go with Yohko's advice.
posted by Flood at 3:58 AM on November 18, 2013

I think the house swapping is clouding the issue, here. It's not at all necessary for the financial element unless something is missing that we don't know about (like you'd get a higher mortgage to cover the whole amount on your mum's house but not your own?).

Adding the 14 grand to your own mortgage and paying her mortgage off outright seems to be the easiest option to me. Doing this through your mortgage provider should be simple enough.

The house swapping is a separate issue completely.
posted by Brockles at 5:04 AM on November 18, 2013

There is no simple fix.

Speak to an accountant and a tax lawyer - like wackybrit says - this is firmly in estate planning territory if you are basically swapping ownership of houses, or plan to do so at some point in the future. For example: if you were just to swap ownership you might both be liable for stamp duty (because you would be purchasing one another's property) if you took no other action. If there is gifting involved there are still rules to follow - your mother may be required to pay you rent if you own the property but she lives there for example.

If it's just a question of costs then the simplest option is to pay the mortgage on her behalf. Otherwise you would need to speak to your mortgage company about refinancing. Some can be funny about this though - interest rates are low and for obvious reasons they prefer to treat refinancing as someone taking out an additional loan (rather than mortgage) if they can.
posted by MuffinMan at 5:26 AM on November 18, 2013

Response by poster: Hrmm I left out a detail. My mother pays around £280 a month for her £14,000 mortgage. I pay around £380 a month for my £72,000. It is out of the question for her to change hers so the payments are lower because she is quite old. Also me taking on £280 on top of my £380 is going to be rather a killer at this stage!
posted by aqueousdan at 9:42 AM on November 18, 2013

She can still get a better mortgage rate than that even if she's old. She's simply paying a massively inflated rate, and needs to call up and change to a lower one.
posted by stevedawg at 9:52 AM on November 18, 2013

If she has low income/savings, your mother may want to check if she qualifies for some Support for Mortgage Interest payments to be made to the lender via Pension Credit, as well as perhaps payments for herself on top of the State Pension. NB one of the (several) requirements for the housing costs element of Pension Credit is that it is only normally payable for a loan used to buy the house you actually live in.
posted by wilko at 10:44 AM on November 18, 2013

Watch out for the interest rates. She's probably got a better LTV than you and will, therefore, be paying a lower rate of interest. Slapping her debt onto yours could be shifting it to a higher rate.

If she's got a rubbish rate, how about remortgaging? I find MoneySuperMarket a good way to see what deals are out there. I managed to get a decent rate fixed for two years about a year ago and it could have resulted in a sizeable drop in the monthly payments.
posted by mr_silver at 12:12 PM on November 19, 2013

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