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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:
slithytove · 29/10/2018 15:50

The reason it wouldn’t matter in your home is because it’s your home - bought to live in and paid mortgage in lieu of rent. To an extent it doesn’t matter if it’s into negative equity if there is an affordable mortgage on it (e.g. house hasn’t been revalued since dropping in value).

You are essentially buying your mums house as a very very long term investment without any short term gains.

Say you borrow 175k - around 650 a month in payments maybe? You are receiving no income to cover that so it directly affects your affordability. How long will you fix for? 2/3/5/10 years? St the end of that fixed rate, you will have to remortgage or be stuck on the banks 4/5% PLU whatever base rate is. Most people take that risk because it’s better than paying rent and worth it to start paying off a family home.

Say in 2 years base rate is 4% and your fixed term has ended. You suddenly face repayments of 1500 a month. If the house value has dropped which is looking likely, you will be worse off when remortgaging.

What if you have had a child and either left work or now have childcare of 1000 a month to continue working? You wouldn’t be able to move then and you would be stuck. Meanwhile, your mum is happy in her house.

I know the above is hypothetical but it has to be taken into account as a possibility when doing this sort of thing. You don’t seem to understand.

Original poster
HalfwayCrook · 29/10/2018 15:51

I expect my sister to be able to have a grown up discussion about this...if she huffs and puffs and expects equity out of nowhere which without us doesn't exist then I will be disappointed in her myself, forget the other way round. It is a complex matter and this idea has only been floated in the last couple of weeks it makes sense to look into feasibility before getting her opinion. Otherwise she will just ask the same questions and we will have no answers or proposals.

OP posts:
Walkingdeadfangirl · 29/10/2018 15:54

Either way some mortgage lender somewhere is going to take £175k from the family some way or another
A lot of which comes back to the family when the house is eventually sold, after DM passes.

CheesyMother · 29/10/2018 15:55

But @Doubletrouble99 you said earlier that she was able to cover your mortgage costs but that having her pay it was too complicated than you just paying it. How much more expensive are her options? Have you actually looked in to it?

Original poster
HalfwayCrook · 29/10/2018 15:55

Of course if she was eligible for any sort of mortgage it would be very high rates regardless of her current debts! Mortgages for pensioners will be repayment and very short term say 10 years to pay 175k at a reasonably high interest rate! And that is if she is eligible.

OP posts:
OliviaBenson · 29/10/2018 15:56

She is used to paying an interest only 30 year mortgage not a 10 year repayment mortgage particularly close to retirement.

Yeah so she's used to paying low sums because she's been financially reckless.

Because she's not used to paying higher monthly amounts doesn't mean she shouldn't or can't now.

If she wants to stay in the property so badly, surely this is the option, and not your crazy ass solution which would be good for your Mother, but bad for you and bad for your sister.

Why on Earth is this not being looked at by you all?

bourbonbiccy · 29/10/2018 15:57

So your DM won't consider downsizing but is going to loose the house if she doesn't , so she us happy for you both to loose any inheritance and us bring extremely selfish. If she was so fussy on where she lived she should get herself in that much debt. She sounds deluded on real life.

You sound like you think you have this nice little plan, that will ,however you dress it up, stop any inheritance for your sister, which is incredibly selfish also that will ultimately be a disaster. A family gone should be that, somewhere to go to if you need to, so if your sister lived their until she was 35 so be it. That does not entitle you to scheme her inheritance away.

How do you intend on starting a family in a one bed flat , that is so unrealistic and impractical or are you going to do your little deal, then kick your mum out anyway and move into the house.

All sounds very dubious to me and a complete disaster. I think you should steer well clear, how would you like it if the shoe was on the other foot and you were having no inheritance.

Tell your mum to sell the house at market value and buy a smaller flat or house and be an adult and don't get into any more debt, you buy your own place, when your mum passes ( hopefully in 40yrs+) sell the flat split the profit.

OliviaBenson · 29/10/2018 15:57

Do you even know it would be high rates? Or are you just comparing it to the deal she's on now? Because that's madness if you are.

Hont1986 · 29/10/2018 16:00

It seems like OP has seen the chance to snap up a £350k house for £175k and the dollar signs have lit up in her eyes and no amount of posters saying "this is not sensible. Do not do this" are going to dissuade her.

Original poster
HalfwayCrook · 29/10/2018 16:01

Slithytove we have looked into affordability it is fine - either we get a big family home for ourselves as per original plan or get DMs house plus flat for ourselves/house in less desirable area. Either way we would be stretching ourselves financially but that is life in expensive areas really.

Yes we would be unable to reduce to one income but would probably still be able to factor in childcare. As I said previously MIL is offering free childcare and is 100% sure, fit and healthy.

Yes it has been valued and surveyed this week.

Yes it would still be considered part of her estate as a gift with reservation. That is fine and liable for IHT but I believe only on the gift half not the half we legitimately bought.

Of course we have pushed downsizing but to no avail.

OP posts:
CheesyMother · 29/10/2018 16:02

Why would it be a high interest rate? She's got 50% ltv! Yes, it might be a shorter term, but not necessarily- there are specialist lenders. It sounds like you haven't even looked into this at all! Say it all really...

Original poster
HalfwayCrook · 29/10/2018 16:03

Thanks walkingdeadfangirl that is pretty much how I have been seeing it. In this scenario what would be fair to propose to DSis?

OP posts:
Original poster
HalfwayCrook · 29/10/2018 16:06

Hont1986 well that 175k would always be borrowed by us for a mortgage. It is question whether to go for our dream family home and sorted ourselves out or settle a bit and use it towards DM's house instead. We will definitely be spending it either way.

OP posts:
OliviaBenson · 29/10/2018 16:11

It seems like OP has seen the chance to snap up a £350k house for £175k and the dollar signs have lit up in her eyes and no amount of posters saying "this is not sensible. Do not do this" are going to dissuade her.

Agreed. Funny that op is ignoring posters who are asking whether the option of her mother getting a mortgage has actually been explored properly and fully (mine and others). Hmm

TrippingTheVelvet · 29/10/2018 16:11

What happens if, God forbid, you pay this mortgage for a few years and your mum has a stroke or something? I think you are vastly underestimating the chances of her taking unwell. Even if she's fit and healthy it certainly isn't unusual for someone in their 60s/70s to die out of the blue. You would be totally fucked in that realistic scenario.

Original poster
HalfwayCrook · 29/10/2018 16:12

Slithytove yes I expect a 2 year fix and then reassess family finances before remortgaging. DM will always help us out if necessary, she pushes all her money on us which we refuse. If we were struggling and she was sitting there with 2k a month pension rent free she would contribute somehow.

We can afford childcare 1000 per month on our current salaries taking into account both mortgages. However as I said MIL plans to do our childcare fulltime and has planned her retirement around it!

You can go too far with hypothetical scenarios! Anyone can have DC with disabilities or crazy misfortune. In that case we sell DMs house and that is that. If we had to sell DMs house early i.e 5 years time I would happier to give DSis more than otherwise because we had taken on less risk/sacrificed less than expected.

OP posts:
Original poster
HalfwayCrook · 29/10/2018 16:14

CheesyMother yes of course we have looked into her mortgage options. Very few possibilities and the monthly payments for her age would be very high if she was even approved due to other debts.
We would have a far better deal with 35 year term etc and lowest possible rates.

OP posts:
SnappedandFartedagain · 29/10/2018 16:15

You’ll probably find out soon that she has discovered she can’t do an equity release anyway - equity release is usually for older homeowners with no mortgage. What equity release firm will be willing to pay off her £175k mortgage and also give her a cash sum on a £350k house?! It’ll never happen, there’s no meat in it for them.

If you leave well alone and do nothing she will have to downsize as there will be no other option, and that is the best option financially for everyone.

lboogy · 29/10/2018 16:16

Quite rights @Walkingdeadfangirl
I'm struggling to understand why people think op is trying to rip off her sister. It's not OPs fault that she's in a better position to help her mum than her sister is. Not to mention her sister is in no way helping towards keeping her mum in a home. OP should be quite rightly be rewarded for doing so

I can see how sis would be miffed but at the end of the day she needs to come up with an alternate suggestion. Letting mum do equity solution is not a solution in my mind

Original poster
HalfwayCrook · 29/10/2018 16:17

When I say high rates I mean higher than a young person would get. Also the term would not be 35 years like it would for us. We would aim for 35 with flexibility of overpayment as our salaries increase.

OP posts:
Original poster
HalfwayCrook · 29/10/2018 16:17

When I say high rates I mean higher than a young person would get. Also the term would not be 35 years like it would for us. We would aim for 35 with flexibility of overpayment as our salaries increase.

OP posts:
Original poster
HalfwayCrook · 29/10/2018 16:20

TrippingtheVelvet? Has a stroke as in passes away - then the house would just be sold? Or you mean needs care? Yes that would be more complex and they would have to look into whether this counted as intentional deprivation of assets to avoid paying for care.

OP posts:
OliviaBenson · 29/10/2018 16:21

Well yes she may pay higher rates, but is that unaffordable for her?

A shorter period actually means less interest overall- 35years is a lot of interest to pay even at lower rates.

Also she'll own the house outright after 10yrs, leaving you to buy your own place to suit your needs and yours and your sisters inheritance in tact.

slithytove · 29/10/2018 16:22

Halfway with all due respect you have no idea what affordability will be like in 2/5/10 years

It’s why BTL comes with risks and is recommended to have x amount of income from that property. You have no such income.

Original poster
HalfwayCrook · 29/10/2018 16:23

Snappedandfartedagain, yes I would be glad if equity release was not an option as I would rather she was forced into downsizing or a high mortgage, financially speaking. However I have a feeling there would be some scheme around. She is very happy to do equity release without actually getting any equity out of it!

OP posts:
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