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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:
Dotty1970 · 29/10/2018 12:07

Reading this I don't know why peyote are bothering with such great advice, long messages which have taken time etc. to someone that really is going to do it anyway, fleece her sister on the proviso she is crap with money, purely looking at this as an easy way to financial gain etc etc.
You want us to say yes do it, sounds a great idea, your a wonderful person for getting dm out of the crap. Your not.

Dotty1970 · 29/10/2018 12:07

Maybe not peyote but *people

Original poster
HalfwayCrook · 29/10/2018 12:12

Doubletrouble99 surely that is only if you need to try to avoid IHT? We are not trying to avoid it, anyway the gift is 176k so under the threshold.

OP posts:
Dotty1970 · 29/10/2018 12:15

You say this :
Randomusername01 DSis had this opportunity and declined. She has now bought her own house at full affordability and has none spare to put in DMs house not that she ever wanted to do so.

Then further on you say she barely knows what a mortgage is..... I think your deluded, contradicting, not being truthful and should just go ahead and face what consequences you will face

OneTooManyMornings · 29/10/2018 12:17

I think the risks, financial and emotional (already outlined by post), are just too high.

Your mother had the family home while she needed it but now she doesn't and can no longer afford it either. You may need a family home soon and are risking not being able to afford one because you're keeping your mother in hers.

Don't prioritise her wants over your needs.

OneTooManyMornings · 29/10/2018 12:19

*Already outlined by post- meant to say outlined by pps.

Original poster
HalfwayCrook · 29/10/2018 12:19

As in there is no way DSis would have thought of this plan etc as even buying her own place took her 15 years to do and she found it stressful even though it was very straightforward! She asked for lots of help and needed handholding through the process.

I don't see where I have contradicted myself!

OP posts:
reallybadidea · 29/10/2018 12:20

Regards deprivation of assets from a care point of view - my understanding is that to prove this the council must show that the assets have been disposed of in order to avoid care fees AND that the person could have reasonably foreseen that they would require care. I think this could be quite difficult to prove as the OP's mum is only in her 60s and in good health at present.

LIZS · 29/10/2018 12:22

Surely the "gift" is the entire value of the property, not just the equity. Plus if she can draw on 75k to pay off debts there may well be other assets of value which could take the estate over the threshold. Bear in mind the IHT, CGT rules get reviewed from time to time so no current advice is failsafe.

Doubletrouble99 · 29/10/2018 12:24

You are only allowed to gift someone £3K a year without affecting tax. Look it up yourself.

FortniteIsTheNewCrack · 29/10/2018 12:25

May I just sum up this thread for anyone skimming?

OP: AIBU?
MNers :YABU
OP: yes but
Yes but
Yes but
Yes but
Yes but
Yes but
Yes but
Yes but
Yes but
Yes but
Yes but...

OP Genuine question, does the fact that 99% of responses agree that this is a truly dickish idea, give you any pause for thought at all?

reallybadidea · 29/10/2018 12:26

That's incorrect Doubletrouble.

Original poster
HalfwayCrook · 29/10/2018 12:29

Of course the gift is just the equity the other half would be a normal mortgage in our names?

I have looked it up doubletrouble99 and can't see what you are referring to on the HMRC website.

Of course it gives pause for thought, that is the whole point of the thread...

OP posts:
wowfudge · 29/10/2018 12:31

OP - you sound as though you trying to do the kindest thing by your DM. However, her financial situation is not your responsibility. It would be kinder by far for you to step back and let her deal with, and sort out, her own mess. She has what to me is a massive debt. She has an asset and equity in that asset which could cover the debt. So let her deal with it.

She is your parent and you are all adults. Imo your DM needs to grow up, take responsibility and sort out her own mess.

How did she accrue the debt btw?

Original poster
HalfwayCrook · 29/10/2018 12:35

Regarding gifts all I see is gift with reservation of benefit which is what this is. But it is under the threshold anyway so not liable for IHT regardless?

OP posts:
reallybadidea · 29/10/2018 12:35

I don't actually think that the OP is being massively unreasonable. I think that she needs specialist financial advice about any potential implications and needs to be aware that this may cause trouble with her sister in the long term, but I don't think that it's a stupid idea at all.

EdwardScissorskills · 29/10/2018 12:38

I can’t get over the idea that you are planning all of this, at the expense of your own family home plans which you are now suggesting putting on ice (and I would suggest all in a small flat when you could be in a house will get old very quickly, even more so for your husband if that wasn’t his childhood experience), for a house that neither you nor your sibling actually wants to live in, in an area you don’t want to live in (yet you airily say you would move to if the flat got too much), that there is every chance your mum won’t live in until she dies (it’s an hour away from you! Where does your sister live, not that you can rely on her to help out when your mother gets older I suspect based on all this), and even if she does, you will then sell on her death? Madness.

LIZS · 29/10/2018 12:39

The gift is the asset - how you fund it is up to you.

LIZS · 29/10/2018 12:41

There are annual tax free gift allowances and for one off occasions like to a child on marriage. These would not be part of the estate within 7 years.

Sindragosan · 29/10/2018 12:42

So your mum doesn't want to spend money on property but wants to live in a specific one? And is happy for you to pay to maintain her lifestyle? If it is purely a matter of not being able to get a good mortgage, surely she would suggest the mortgage is in your name and she pays it?

You're getting yourself sidetracked by equity and inheritance and your sister and missing the massively cheeky plan of your mum for you to pay for her housing when she could herself.

RayRayBidet · 29/10/2018 12:46

I can see that care fees won't be an issue. You will end up doing it because your mother couldn't possibly go in a home or have strangers in her house.
Honestly your mother is calling all the shots here. She refuses to downsize, won't use savings to clear the debt she incurred from being conned.
Now she has you bailing her out and leaving her sitting pretty.
At the end of all this you may or may not get some equity after you have coughed up stamp duty, arrangement fees, surveys, solicitors, capital gains and then might have the stress of being investigated for deprivation of capital.
Personally I think you need to get a proper grasp of her finances as you are taking her word for everything and honestly let her do the equity release if that is what she wants. Actually they are better if you are younger and live a long time. I believe you can also get partial ones where the ER company owns a share.
Given that she has savings that she won't touch except for a rainy day (I would have thought it was already pissing it down but that's just me) then you and Dsis will probably inherit something anyway.
Your mother is being ridiculous,don't join her fgs.

Original poster
HalfwayCrook · 29/10/2018 12:52

Lizs I am not sure that is true. The liability would surely be on the difference between the market value of the house and the sold price only i.e. the current equity and any price rise thereafter? Please do let me know if you have a link saying otherwise!

OP posts:
Original poster
HalfwayCrook · 29/10/2018 12:54

Yes she has suggested mortgage in our name and her paying it but that does not work with lenders. Believe it or not our idea is more feasible.

By savings I meant 10k that is all!

OP posts:
Sindragosan · 29/10/2018 13:01

I know plenty of people who have done that but not told the lenders. Money is just transferred each month to whoever pays the mortgage. The problem would be if you wanted another mortgage for your own home and couldn't get a second one even if you were able to afford it, but if you're fine with that, it is a solution.

WalnutToast · 29/10/2018 13:04

As your sister is no longer living with your mother, could your mother take a lodger? This could provide a good stream of income to put towards a mortgage. ( if you go ahead with your scheme, the lodger could pay you rather than your mother rent which you could put towards the mortgage.)

Depending on where she lives there's also the possibility of exchange students, AirBNB etc rather than a permanent lodger.

If she's reluctant to do this maybe question how serious she is about sorting her finances?

I wouldn't be too dismissive of the possibility of negative equity. A lot of people in the 1980s ended up with negative equity in the UK.