Should I help my mother pay off her mortgage early or will it complicate any inheritance?

My mother moved to a new property two years ago. She is currently 66 years old, lives alone and has just started receiving a state pension.

But he still works three days a week and hopes to work three more years.

You currently have an interest-only mortgage for another 10 years.

You have enough in your pension to maintain the interest-only mortgage, but there will surely come a time when you reach an age when the bank will no longer maintain it.

What is the best way to help my mom pay the mortgage on her house?

My mom and I are open about finances and the future. I am your executor. In her will she has told me that I will receive 60 per cent and the rest will go to charity.

Should I get a joint mortgage with my mother so that my name is also on the mortgage or should I give her money to change it to a payment mortgage? Or does this simply complicate things in the future regarding inheritance?

I am 39 years old, married and have no children. It is unlikely that I will have any in the future. My wife and I are currently overpaying our mortgage and hope to complete it in three years.

Ed Magnus from This is Money responds: It’s great that you and your mother are having open conversations about your finances and the future. Many times these discussions are avoided until it is too late.

Although your mother’s mortgage seems to be the main concern, you should try to find the most financially efficient way to maintain it.

Helping your mother pay the mortgage may seem like the obvious route, but then you may feel exhausted when you are only given 60 percent of her estate in the will.

There are also senior loan options, such as interest-only retirement mortgages for older borrowers, that could be considered.

For expert advice, we spoke to Karen Noyemortgage expert from wealth management company Quilter, Elena Todorovadirector of the mortgage brokerage SPF Private Clients and Ashley Smithchartered financial planner at SPF Private Clients.

Should they add your name to your mother’s mortgage?

Karen Noye responds: There are several important things to consider when it comes to adding your name to your mother’s mortgage, one of which is key: you may initially be responsible for the costs of stamp duty as you would be earning interest on what would be classed as a second property.

Additionally, if you were to join the mortgage with your mother and therefore purchase the property, your mother would have to pay market value rent on the percentage of the property you own or the total value of the property would be would be included in your estate in the event of your death, as it would be treated as a life interest.

Any decision you make regarding adding to your mother’s mortgage will need to be carefully considered, preferably with the support of a professional financial advisor to ensure you make the most tax-efficient decisions.

Expert: Karen Noye, mortgage expert at wealth management company Quilter.

It’s important to note that adding your name to your mother’s mortgage would also require you to go through a full affordability assessment, and you would need to be able to pay not only your current mortgage, but your mother’s as well.

Any future financial changes or decisions you make, your mother’s mortgage will factor into your affordability, so it could affect your ability to borrow or move house in the future.

Elena Todorova answers: As for your mother’s mortgage, it has ten years left on it, so it looks like it will end around her 75th birthday, when the principal will need to be repaid.

You may be able to help her by becoming a guarantor on the mortgage while extending the term, giving you both more time to pay off the balance.

By becoming a guarantor, you will not assume ownership of the property, but you will still be responsible for the mortgage and your income must be sufficient to cover both your own mortgage and that of your mother.

You may also consider becoming a joint owner of the property, but depending on the share you are able to acquire, there could be a potential stamp duty charge and this may affect your mother’s decision about inheritance.

What if they move your mother to a mortgage payment?

Karen Noye responds: If you agree to pay a mortgage in your mother’s name, those payments must be made regardless of whether your or your mother’s circumstances change.

Alternatively, if your mother’s mortgage is fixed, most lenders will allow approximately 10 per cent overpayment of the outstanding balance each year.

Expert: Ashley Smith, Chartered Financial Planner at SPF Private Clients

You may wish to use your annual gift allowance, which allows you to transfer £3,000 a year tax-free to help reduce your outstanding mortgage balance, and you can do this on a regular or ad hoc basis depending on your affordability.

Keeping the mortgage interest-only and paying off overpayments when you can will give you flexibility should your circumstances change.

Ashley Smith adds: For every £100 you redeem, you will receive £60 in your mother’s will, so donating funds to pay off your mother’s mortgage would not be particularly efficient from an inheritance point of view, as 40 per cent will go to charitable organizations.

A much better approach may be to lend these funds to your mother, so that the principal is repayable to you and does not form part of your estate.

How about focusing on your own mortgage?

Karen Noye responds: As you expect your own mortgage to be paid off in three years, you may want to wait until you have paid it off and revisit this when you have more disposable income and are no longer responsible for your own mortgage payments.

What other options are there?

Elena Todorova answers: You may also want to explore mortgages for sole proprietors of joint borrowers; Parents often use them to help their children, but in some circumstances they can be used the other way around if you meet the criteria.

Expert: Elena Todorova, director of the mortgage brokerage SPF Private Clients

Another option may be for your mother to take out a mortgage for later life once the term of the current mortgage ends, if a regular mortgage is not an option after age 75.

The mortgage loan will depend on the value of the property and its age at the time.

Loans for seniors are not dependent on income but on age and one of the benefits is that your mother will not need to make monthly payments.

However, one of the drawbacks is that interest accrues on the loan and can potentially erode the equity in the property, leaving little inheritance.

The second problem he faces is the principal his mother needs to repay with the interest-only option.

You can help your mother by being in a position to save funds to help her reduce the loan, potentially increasing the equity available in the property and the size of her estate.