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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

AIBU to take all the equity?

507 replies

HalfwayCrook · 28/10/2018 20:16

So DM (working, healthy, in her 60s) has always been terrible with money and has a lot of debt hanging over her. The family home which has been on a 100% LTV interest only mortgage is coming to the end of its term next year and due to her age she will not be able to get a re-mortgage without getting involved in some dreadful equity release scheme or some such.

There is no question of downsizing or selling the property as she will not hear of moving house. The plan I have come up with is for me and DH to buy the family home for the price of the mortgage (i.e. being gifted £175k of equity which has been gained through price rise alone) and to then pay a repayment mortgage allowing DM to live there rent-free. This would mean that the family home is kept, the equity is not lost (particularly to pay off her other debts) and that she would free up significant monthly income by not paying the mortgage to pay off these other debts.

The issue is that I have a sister and I am concerned that she may see this as me taking away any chance of an inheritance? For background, although we have similar salaries she would not have the financial capacity to do this as she has just bought her own house (after living in the family home for 15 years not paying rent, bills or food). When she was looking for properties, I encouraged her several times to buy the family home instead but each time she refused (it is not in the best state of repair however perfectly liveable). As far as she knows, the family house is written off and is to be used to pay off debts etc. Also by DH and I taking this on, it will mean we are unable to upgrade our own home (living in a 1 bed flat) which means that we are taking on a big hit to our personal life e.g. less space to start a family. It has taken considerable stress and research in order to plan this and she would never have put forward this herself.

I feel that if we pay into this for say the next 20 years the proceeds from the resultant sale should be ours? However if by some terrible misfortune DM passed away in the next 5 years I accept that it would be best to share with DSis – perhaps two thirds to one thirds? AIBU?

OP posts:
Thisreallyisafarce · 28/10/2018 20:30

Sounds an awful lot like you're taking her inheritance to me. How much is the debt?

MrTrebus · 28/10/2018 20:34

You'll struggle to get a mortgage on the place if she's going to ask for lifetime tenancy (I.e you can't ever kick her out) just a heads up

mrcharlie · 28/10/2018 20:34

Bad Bad Bad,
It will cause wounds that will never heal....I speak from experience.

Fairylea · 28/10/2018 20:34

It all sounds incredibly messy. Your dm is still relatively young. I think you shouldn’t take responsibility for her own mess to be honest.

LIZS · 28/10/2018 20:35

Could cause issues if she ever needed residential or means tested care, as a potential deprivation of assets. Also for IHT purposes the "gift" may be included in her estate, were she to die within 7 years.

Jessiemay88 · 28/10/2018 20:35

You are taking her inheritance.

HauntedPencil · 28/10/2018 20:35

This sounds like it has all the potential to start a huge issue.

Have you discussed with your sister?

HauntedPencil · 28/10/2018 20:39

Plus I wouldn't do it as it clearly will have a large impact on your ability to move house in future etc.

Why does she need to live there rent free?

Assuming you haven't had children & you mention you may start a family you aren't going to want to do that in a 1 bed flat for long.

You are effectively paying your mums mortgage who is stilll young allowing her to live rent free whilst you are stuck in a home which you will outgrow paying 2 mortgages?

It just sounds shit all around!

LizzieSiddal · 28/10/2018 20:40

Have you thought this all through?

Your mum could live for another 30 years, will you be happy to stay in your one bed flat until you’ve paid off the mortgage, on her home?

Also if your mum needed to go into a care home, would you be happy for her to go into a council run home or would you end up selling the house, to pay for her care? In which case you could ending up with nothing.

Original poster
HalfwayCrook · 28/10/2018 20:42

To answer questions, I think her debt is around 75k or so. Yes it will be difficult to get a mortgage however it is possible according to broker.

DM is on board with this idea and is very pleased to have a chance to stay in the property. 175k is below IHT threshold. I wouldn't have thought it would be seen as deprivation of assets considering she is youngish, fit and working? Yes she could go into a council run home I suppose as she would if the property was sold next year.

I am not saying we could never move out of our 1 bed but it would take some time i.e. salary increases and even then would only be a 2 bed. However it would be worth the sacrifice for the equity gift I suppose.

No I have not discussed this with DSis as I was trying to work out the feasibility first. If people think IABU then what alternative would they suggest?

OP posts:
Tahani · 28/10/2018 20:43

I think this is terrible idea, you'll be tied in for a long time potentially

She has other debts that need to be paid, I'd go for an equity release.

TheChatsPyjamas · 28/10/2018 20:43

Talk to your sister now. I’d say it would be fair if you gave her 1/2 the 175k when you sold, if the price had gone up. Sure, you’re taking on the risk and not moving yourselves (sure you want to do that?) but sometimes family perceived fairness is more important.

Pommes · 28/10/2018 20:48

Any equity, at the date of purchase, minus existing debts should be split equally between you and your sister. If there is £175k equity, minus £75k debt, then your mother still owns the £100k equity. If/when she passes, any equity from that £100k should be shared equally between you and your sister if this is your mother's choice. Her last will and testament is exactly that, hers.

Once the property becomes yours (under a mortgage) any equity accrued after that point would/should be entirely yours.

HauntedPencil · 28/10/2018 20:48

I'd rather her do equity release than this, its really messy. What if one of you lost your job and couldn't keep the payments, or got into financial bother? She'd lose her home then.

MaryPoppinsUmberellaHandle · 28/10/2018 20:48

I think this is a terrible idea.

It looks like you're trying to find ways for her not to pay her massive debts back, by getting the house out of her name, as well as doing your DSis out of any inheritance, at the same time.

Sorry, but I think YABU.

Tistheseason17 · 28/10/2018 20:49

Don't do it. Your DM will live for at least another 15-20 yrs restricting what you can do. PLUS it would upset your DSis.

Your mum needs to sell, downsize and sort her finances. Sad, yes, but her bad financial decisions are not for you to resolve.

Honestly, it does look like you're trying to ensure your inheritance

HauntedPencil · 28/10/2018 20:50

If you do it I would do as Pommes said. Half each equity at date you bought it, thereafter you get the growth entirely as you bought it.

TheOneWith · 28/10/2018 20:51

This has disaster written all over it, I’m not sure why you’d saddle yourself with this to indulge your mums financial fuckwittery simply because “she will not hear of moving house”. Yeah I bet she won’t with the thought of living rent free for life.

HollowTalk · 28/10/2018 20:51

Why not buy a separate house which you then live in, then let your mum rent your flat off you? Why should your mum end up in a much bigger place than you and your family? That doesn't make any sense.

HauntedPencil · 28/10/2018 20:54

You'd probably make more equity putting all your money into your flat & moving up the chain than this.

Who'd pay for repairs, decoration etc etc?

Don't be blinded by the 175k.

LizzieSiddal · 28/10/2018 20:55

You’d be mad to do this, absolutely mad.

You’re taking out extra debt(mortgage) so your mum can stay in “the family house”, whilst you and your dh stay in a 1 bed flat.

And you’ll piss off your sister.

It doesn’t make any sense at all.

FissionChips · 28/10/2018 20:55

What would you do if you or your DH become unable to work due to illness or disability or lost your jobs? You’d all be in the shit.

LizzieSiddal · 28/10/2018 20:56

Pencil that’s a very good point about the repairs and upkeep of the house.

OP you say the house isn’t in great repair. So can you afford to do repairs and pay for a new boiler for example?

footballmum · 28/10/2018 20:57

Your mum has got herself into this mess, she can get herself out of it. I’m struggling to understand why you are trying to rescue her, to your own detriment?

Walkingdeadfangirl · 28/10/2018 20:59

Can you buy the house at fair market value using a buy to let mortgage. Then your mum is a tenant, can use the money to pay of her debts, invest the rest and pay you a fair rent. When she dies (or sooner if she prefers) her estate can be split equally and fairly between her children. You will get the rise in value of the house from when you bought it, plus your share of any money she has left from the sale of her house.