Looking for a way out of a financial predicament

LegacyUser · 25-11-2019 11:53pm #1

I'm 46 and have been living back at home with my elderly parents for the past 5 years.

Though I'd a well paid job in my 30s, it involved working terribly hard to hit targets in a highly pressurised and competitive environment & over time it took its toll. I fell apart, spectacularly so and what followed was a long period of unemployment.

These past few years, with the help of a loving family and friends, I've got back to work in a job that makes me happy and I'm really grateful to be surrounded by some super people. At €26k p/a it's way off where I was a few short years ago, but my mental health and general well-being are worth far more to me.

So, I suppose on to the crux of the issue. My parents have a loan on the family home of approx €100k which is ever increasing due to compound interest and will need to be addressed if I am to remain in the home and possibly access the fair deal scheme if, god forbid, Mam and Dad need a level of care that would likely be beyond me to provide. With the passage of time, that's naturally an ever more pressing worry and concern. The property's open market selling price is about €325k. I'm not looking for very specific financial advice (which I'm guessing people are precluded from giving here). I'm wondering if anyone's been faced with a similar scenario or has ideas as to how to begin lsearching for a solution?

zapper55 · 26-11-2019 10:43am

This might seem obvious but would you apply for a mortgage of 100k? You'd need to talk to your parents first about the possibility of transferring the deeds to you. If they were open to it I'd talk to a solicitor before you tall to.a bank. Do you have siblings? That might complicate things but either way a chat with a solicitor would be good.

26-11-2019 2:42pm

You are right to look at this now.

As above take some professional advice and your parents probably should too.

You should consider your position as a family, and individually.

What is the plan for this debt otherwise?

LegacyUser · 26-11-2019 8:41pm

zapper55 wrote: »

This might seem obvious but would you apply for a mortgage of 100k? You'd need to talk to your parents first about the possibility of transferring the deeds to you. If they were open to it I'd talk to a solicitor before you tall to.a bank. Do you have siblings? That might complicate things but either way a chat with a solicitor would be good.

Many thanks to both of you for your considered replies.

As the property has a lean on it, I'd imagine I can't raise a mortgage until such time as that liability is cleared, as effectively Mam and Dad don't fully own the house. I'd almost need a bridging loan of sorts to buy the company out to the tune of €100k and then convert that to a mortgage. I've no idea if a lender would be amenable to such an arrangement or if Revenue would find it in compliance and that's where, as you say, professional advice is required. There would also be consequences with regard to the fair deal scheme, which has to be factored so matters are far from straightforward.

I do have siblings and to their eternal credit, all they're concerned about is the welfare of our family. They have their own commitments and can't really assist financially, but have made it clear that they are not looking for an inheritance in terms of disposing of the family home down the line. Should I manage to somehow acquire the property, it would be my intention to leave it to my nieces and nephew, who are the absolute apple of my eye.

meeeeh · 27-11-2019 8:59pm

Are you paying rent. If not you should so your parents can pay off the loan quicker and then they can decide whether they want to do with the house.

Rufeo · 27-11-2019 10:13pm

Can you see if there are any ways to make money online. Like doing surveys or user testing or writing articles. Freelance stuff. That could give you a few extra quid, at least you could start helping ur folks with the house.

LegacyUser · 27-11-2019 11:26pm

meeeeh wrote: »

Are you paying rent. If not you should so your parents can pay off the loan quicker and then they can decide whether they want to do with the house.

I contribute a good chunk of my net wage to my parents and do so also when those inevitable unforeseen expenses crop up. Given the compound interest element and their age profile, that's unfortunately not enough to ever get ahead of the debt, even if every cent went into servicing same.

meeeeh · 28-11-2019 12:13pm

GrapesofMountrath wrote: »

I contribute a good chunk of my net wage to my parents and do so also when those inevitable unforeseen expenses crop up. Given the compound interest element and their age profile, that's unfortunately not enough to ever get ahead of the debt, even if every cent went into servicing same.

Then you have a loan that you can't service and if I understand you correctly it's not getting smaller. You should contact MABS to see what your options are. While you live at home your siblings (if you have any) might have a say in what happens when your parents need help.

MissShihTzu · 01-12-2019 9:15pm

What type of loan is it your parents have that compound interest is charged? What is your credit history like? Is there any way you can get the loan in your name and maybe a more favourable rate?

I agree maybe you should have a chat with MABS and see what the options are.

Hope it works out for you!

ILoveYourVibes · 02-12-2019 2:49am

MissShihTzu wrote: »

What type of loan is it your parents have that compound interest is charged?

Its more like every mortgage ....most are 'compound mortgages that don't compound' because you pay the interest in full each month leaving nothing to compound

But if you skip payments the loan doesn't behave like a simple interest loan.

The way you pay can have a compounding effect ..paying EARLY can have a compounding effect in that it can REDUCE the amount of interest you pay overall. You know the way if you over pay each month you can reduce the interest you pay overall etc.

There is really no such thing as a mortgage that is only simple interest. Well maybe if its JUST an interest loan.

Typical mortgages can behave like a compound interest loan. The compounding effect comes from payment structure though not technically from compounding interest ..although the result can be the same....so its no difference.

A mortgage is technically a simple interest loan. That is what they will tell you. But it can behave like a compound interest loan.

All these mortgages with variable amortized payment structures enable banks to make a killing long term sometimes.

Its not going to change the name ..but the WAY you pay ...really affects what kind of loan you end up with ...does that make sense??

I am probably not explaining this well.

For example compound interest can be charged on arrears etc.

It also depends on WHERE ..in Ireland ..(correct me if i am wrong ) mortgages are compounded quarterly. .but if you are on a fixed rate and you pay as you should it wont accrue and it works out the same as simple interest

Its not safe to assume the above though.

But its not that way in the UK canada and the us...it might be less or more ..

Banks treat variable customers terribly imo...

What i have said prolly doesn't make sense so sorry bout that!

ILoveYourVibes · 02-12-2019 3:20am

OP please go and get some professional financial advice from someone very qualified wise and experienced.

Fakediamond · 02-12-2019 9:20am

Talk to MABS or similar, who are brilliant at getting these loans restructured and dealing with compound interest.

ILoveYourVibes · 02-12-2019 9:42am

Fakediamond wrote: »

Talk to MABS or similar, who are brilliant at getting these loans restructured and dealing with compound interest.

This.

LegacyUser · 05-12-2019 7:09pm

There are a few things to consider here...

1. If you are a first time buyer you would need a 10% cash deposit and 20% if you have not owned property. If you had the cash deposit and were approved for a mortgage your parents could sell the house to you and their loan would be paid off when the house is transferred to you. Their mortgage would be cancelled and you would have your new mortgage registered as a charge against the property.

2. If your parents do this and then require the fair deal scheme within 5 years of the transfer of the property the house will still be treated as part of their assets and a charge will still be placed against it. Your parents can still avail of the fair deal scheme if there is a mortgage on the property. The fair deal charge and the mortgage would need to be paid off when the house is sold after they pass away.

LegacyUser · 06-12-2019 12:18am

Thanks so much all, some really constructive stuff there - I'll reply to a couple of contributions in more detail tomorrow if I may.

I've been in touch with MABS and have an appointment to get in for a meeting

antix80 · 08-12-2019 5:40pm

GrapesofMountrath wrote: »

I'm 46 and have been living back at home with my elderly parents for the past 5 years.

Though I'd a well paid job in my 30s, it involved working terribly hard to hit targets in a highly pressurised and competitive environment & over time it took its toll. I fell apart, spectacularly so and what followed was a long period of unemployment.

These past few years, with the help of a loving family and friends, I've got back to work in a job that makes me happy and I'm really grateful to be surrounded by some super people. At €26k p/a it's way off where I was a few short years ago, but my mental health and general well-being are worth far more to me.

So, I suppose on to the crux of the issue. My parents have a loan on the family home of approx €100k which is ever increasing due to compound interest and will need to be addressed if I am to remain in the home and possibly access the fair deal scheme if, god forbid, Mam and Dad need a level of care that would likely be beyond me to provide. With the passage of time, that's naturally an ever more pressing worry and concern. The property's open market selling price is about €325k. I'm not looking for very specific financial advice (which I'm guessing people are precluded from giving here). I'm wondering if anyone's been faced with a similar scenario or has ideas as to how to begin lsearching for a solution?

Your parents should try to get a write down on the debt given their age and lack of assets and ability to pay. Or possibly trade down.

As for your own situation.. Hate to tell you but many jobs that used to pay well now pay peanuts. So.. Best you can do is worry about your own financial position. Maximise your income and forget about the salary you used to be on.

If you decide you'll live with your parents for the rest of their days, they should transfer the house to your name and you should approach the bank to see what sort of mortgage you can get. (likely to be around 50k unfortunately unless you can improve your income)

LegacyUser · 09-12-2019 9:03pm

Fair deal wrote: »

There are a few things to consider here...

1. If you are a first time buyer you would need a 10% cash deposit and 20% if you have not owned property. If you had the cash deposit and were approved for a mortgage your parents could sell the house to you and their loan would be paid off when the house is transferred to you. Their mortgage would be cancelled and you would have your new mortgage registered as a charge against the property.

2. If your parents do this and then require the fair deal scheme within 5 years of the transfer of the property the house will still be treated as part of their assets and a charge will still be placed against it. Your parents can still avail of the fair deal scheme if there is a mortgage on the property. The fair deal charge and the mortgage would need to be paid off when the house is sold after they pass away.

Apologies for the delay in replying all.

1. As the lending institution have an interest in the property, I don't believe I can raise a mortgage until such time as that liability is completely cleared, as Mam and Dad don't fully own the house. In taking some professional advice, there may be a workaround of sorts that I'm currently just unaware of. I'd be hopeful that there may be a solution.

2. What I'm attempting to do is retain the asset both to live in and to pass it on myself in time, but I'm very cognisant that there may come a time where my parents need a level of care I may not be in a position to provide. In weighing everything up, their welfare is paramount and will very much inform how my siblings and I proceed.

LegacyUser · 09-12-2019 9:26pm

antix80 wrote: »

Your parents should try to get a write down on the debt given their age and lack of assets and ability to pay. Or possibly trade down.

As for your own situation.. Hate to tell you but many jobs that used to pay well now pay peanuts. So.. Best you can do is worry about your own financial position. Maximise your income and forget about the salary you used to be on.

If you decide you'll live with your parents for the rest of their days, they should transfer the house to your name and you should approach the bank to see what sort of mortgage you can get. (likely to be around 50k unfortunately unless you can improve your income)

I'd be hopeful MABS will advise on how best to approach the lender re the debt element, but as my parents freely entered that agreement, I'm currently working on the assumption that that sum won't reduce until payments are made against it.

Mention of salary in my first post was given merely as background to be honest and despite this current financial woe, I don't dwell on my previous level of pay in any wistful way. I'm far happier with life now. I believe 3.5 x gross is the standard loan to income ratio?

antix80 · 10-12-2019 12:20am

GrapesofMountrath wrote: »

Mention of salary in my first post was given merely as background to be honest and despite this current financial woe, I don't dwell on my previous level of pay in any wistful way. I'm far happier with life now. I believe 3.5 x gross is the standard loan to income ratio?

That's only one factor. Lenders will assume you need €1300 to live on. If your net income is €1900 and your mortgage term is less than 20 years with a loan stress tested to 6%.. You do the maths.

Not something to worry about right now. Meet mabs first.

LegacyUser · 10-12-2019 12:31am

GrapesofMountrath wrote: »

Apologies for the delay in replying all.

1. As the lending institution have an interest in the property, I don't believe I can raise a mortgage until such time as that liability is completely cleared, as Mam and Dad don't fully own the house. In taking some professional advice, there may be a workaround of sorts that I'm currently just unaware of. I'd be hopeful that there may be a solution.

2. What I'm attempting to do is retain the asset both to live in and to pass it on myself in time, but I'm very cognisant that there may come a time where my parents need a level of care I may not be in a position to provide. In weighing everything up, their welfare is paramount and will very much inform how my siblings and I proceed.

Hi, your parents can indeed sell the property even if there is a mortgage on it. Their mortgage is paid off from the proceeds of the sale to you. E.g. your man and dad have an outstanding mortgage of 120,000. They sell the house to you for 150,000. Their solicitor is obliged to pay off their outstanding mortgage of 120,000 as part of the conveyancing process. Their solicitor will then give them the net proceeds of sale less their fee less any taxes or charges owed. Your solicitor is obliged to register your new mortgage as a burden against the property. I work in this area so I know that I am correct! It sounds like you need good legal advice as you don't understand the process... That's okay because that's why you pay your solicitor !

ILoveYourVibes · 10-12-2019 11:28am

Fair deal wrote: »

Hi, your parents can indeed sell the property even if there is a mortgage on it. Their mortgage is paid off from the proceeds of the sale to you. E.g. your man and dad have an outstanding mortgage of 120,000. They sell the house to you for 150,000. Their solicitor is obliged to pay off their outstanding mortgage of 120,000 as part of the conveyancing process. Their solicitor will then give them the net proceeds of sale less their fee less any taxes or charges owed. Your solicitor is obliged to register your new mortgage as a burden against the property. I work in this area so I know that I am correct! It sounds like you need good legal advice as you don't understand the process... That's okay because that's why you pay your solicitor !

The fees for that would be whatever is left after they pay off the mortgage I know lawyers.

11-12-2019 9:43pm

GrapesofMountrath wrote: »

Apologies for the delay in replying all.

1. As the lending institution have an interest in the property, I don't believe I can raise a mortgage until such time as that liability is completely cleared, as Mam and Dad don't fully own the house. In taking some professional advice, there may be a workaround of sorts that I'm currently just unaware of. I'd be hopeful that there may be a solution.

2. What I'm attempting to do is retain the asset both to live in and to pass it on myself in time, but I'm very cognisant that there may come a time where my parents need a level of care I may not be in a position to provide. In weighing everything up, their welfare is paramount and will very much inform how my siblings and I proceed.

Houses are bought and sold all the time with when there is outstanding liability on the property that's not an issue at all.

It also is no reason for you not to get a mortgage, the money pays off the bank they owe the money to.

Pawwed Rig · 13-12-2019 7:58am

Fair deal wrote: »

Hi, your parents can indeed sell the property even if there is a mortgage on it. Their mortgage is paid off from the proceeds of the sale to you. E.g. your man and dad have an outstanding mortgage of 120,000. They sell the house to you for 150,000. Their solicitor is obliged to pay off their outstanding mortgage of 120,000 as part of the conveyancing process. Their solicitor will then give them the net proceeds of sale less their fee less any taxes or charges owed. Your solicitor is obliged to register your new mortgage as a burden against the property. I work in this area so I know that I am correct! It sounds like you need good legal advice as you don't understand the process... That's okay because that's why you pay your solicitor !

There are a number of tax issues here. The main one being that related party transactions are deemed to be at market value.

LegacyUser · 15-12-2019 1:59am

Pawwed Rig wrote: »

There are a number of tax issues here. The main one being that related party transactions are deemed to be at market value.

That's why I made mention of the OMSP in my OP. I'm not sure if the atypical nature of this scenario changes anything, but I'm guessing Revenue may not be amenable to a cut-down price and resultant reduced taxes

Pawwed Rig · 16-12-2019 12:07am

In this scenario it may not matter given the Group A threshold however it is something you need to understand before entering these types of transactions.

Looking for a way out of a financial predicament

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