Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Flip

1 2 3 4 5 6 ··· 20 21

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:

Original poster

HalfwayCrook · 28/10/2018 20:59

Well if we did not do this we would take on a big mortgage of our own anyway so financially it is the same either way regarding losing jobs etc (1 large mortgage vs 2 smaller). Yes of course we are trying to get the house out of her name that is one of the objectives whilst she is young and healthy.
I agree downsizing would be the most obvious solution however that is just not an option for DM even though we have tried to push that. She would not want to live in our flat, different area - it is the specific home that she wants.

Are people getting that if we do not do this then there is no equity or inheritance to speak of really? DSis is not expecting any inheritance for this reason.

OP posts:

bertielab · 28/10/2018 21:01

Don't do it.

Sell the house.

Original poster

HalfwayCrook · 28/10/2018 21:02

No it is very difficult to BTL to your own family in terms of mortgages. Also we could not afford it at market value.

Yes it is a difficult situation however in my mind seems worth it as it helps us (equity) and DM (saves money, stays in home - both her biggest priorities).

OP posts:

bertielab · 28/10/2018 21:02

If she dies within 7 years -you will be buggered. Likewise -what happens if you die?

Sell the house. Sister had 15 years free house -mother can buy a one bedroom flat not you!

Wauden · 28/10/2018 21:02

And consult the best tax advisor and solicitor, go to yhe specialists

MaryPoppinsUmberellaHandle · 28/10/2018 21:02

Your last paragraph speaks volumes.

Basically, your DSis thinks there's nothing anyway, where as you know there is.......

bertielab · 28/10/2018 21:04

PS she needs to face reality -don't help her -she will HAVE to sell. Not your problem.

Seriously don't do it. Should you and DH split -what would happen then. I know it won't happen -but what happens if it did. Or you die -leaving him with a MIL in a property he can't sell. Please don't do it.

TheOneWith · 28/10/2018 21:08

What comes across from your last few posts, loud and clear, is that you and your mum are doing your utmost to avoid her having to pay off her debts, and you are trying to stiff your sister out of any inheritance.

EK36 · 28/10/2018 21:11

No it's a terrible idea. Can't she sell the house and downsize? You dont want to start a family in a one bedroom flat.Your mother will probably live until her 90s! You'll have to pay for all the house upkeep while living in a cramped flat. Don't do it.

NataliaOsipova · 28/10/2018 21:11

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)

I’m not an expert on this....but surely if your DM ends up needing long term care this sort of transaction would absolutely be placed in the deprivation of assets category?

I wouldn’t touch this with a barge pole. She may not want to move, but if she can’t afford to live there, she will have to. Do not bank on an inheritance - you simply cannot guarantee your mother will not require extended care and/ or that rules on IHT will not change.

SassitudeandSparkle · 28/10/2018 21:14

You can't have two residential mortgages, so if you are going to buy the house then it will be a BTL mortgage.

You are doing your sister out of an inheritance and you want all the equity in the house for yourself, not to mention any gains going forward. You don't appear to be giving your mother anything for the house, just expecting her to gift it to you.

plus3 · 28/10/2018 21:15

How would you feel if this was your sister’s idea?
Personally, I can’t believe how many people think it is fine to cheat their siblings.

lalalalyra · 28/10/2018 21:16

Deprivation of capital has no time limit, it's not the same as IHT, so if she goes into a home the council could come after that amount.

Who will be responsible for the upkeep of the house? Who pays for the new boiler? The new carpets?

Who will have the final say on anything to do with the house?

What happens if your financial situation changes? If you get divorced it'll be an asset. If you die it'll belong to your DH.

How is her debt structured? Can she give away anything?

What will you do when she runs up the next lot of debt?

Original poster

HalfwayCrook · 28/10/2018 21:16

Why buggered if dies in 7 years - it is far below the IHT threshold?
I have said many times, downsizing and selling is not an option according to DM so there is nothing I can do in that regard. She will just get herself into a worse financial situation and I want to prevent that. She does not care about equity at all and is happy to give it to us. In fact she is even happy to pay us for the mortgage but that is complicated and unfair so I refused.

No DSis knows there is equity but thinks that there is no way out of the situation and that it will be given to equity release etc. As I said she did not want to buy the house herself last year.

People who are mentioning if I die - of course we have life insurance and critical illness cover etc.

Yes we can get a second residential mortgage with DM living in there rent-free, this has been confirmed by a broker.

OP posts:

BarbarianMum · 28/10/2018 21:16

Why would you "gift" yourselves 175k? Is that not your mum's money (not yours, not your sister's)? Is stiffing your nearest and dearest the norm in your family or something?

Wauden · 28/10/2018 21:17

There are many issues here that its far too complicated.

NataliaOsipova · 28/10/2018 21:17

Do not touch this with a bargepole. If your DM requires long term care, this would almost certainly be seen as a deliberate deprivation of assets.

You simply cannot bank on an inheritance. You do not know (and cannot guess) what level of long term care your DM will need, nor d y know what will happen to the rules on IHT. This is hugely risky.

SushiMonster · 28/10/2018 21:18

It’s got messy situation written all over it.

You are opening yourself up to shit loads of hassle. Being a land lord and all that entails, entwining your legal and financial affairs with your mother who hasn’t shown any good sense to date, what about her care or if she needs accessible accommodation, not to mention you are scamming your sister out of half that equity.

Wauden · 28/10/2018 21:20

No, just no

SassitudeandSparkle · 28/10/2018 21:20

Why do you expect to have the house for the value of the mortgage only, not the full value of the house?

FissionChips · 28/10/2018 21:21

I have said many times, downsizing and selling is not an option according to DM so there is nothing I can do in that regard

Of course you can do something, it’s simple, just don’t help her out and eventually she’ll be forced to find a smaller home.

April2020mom · 28/10/2018 21:21

Don’t do it. It makes no sense to do so. Who will pay for maintenance etc? Forget about the money. Your mom needs to sell, downsize, sort out her finances and make logical financial decisions. This is a big mistake. Get her to make her way out of her own mess on her own with minimal help from you and your husband. This is part and parcel of adulthood. Encourage her to start the ball rolling. Only by doing it herself will she actually learn a valuable lesson for life.

Dollymixture22 · 28/10/2018 21:22

So you buy her house know from her at £100k less than the value. You allow her to live rpthere rent free for the rest of her life. You pay off the mortgage and the house is yours.

You in effect inherent £100k and your sister gets nothing?

Dreadful idea. While I get you are allowing your mum to live there rent free, you are still benefiting out of this.

Also, what happens if you divorce?

SputnikBear · 28/10/2018 21:22

How much is your mum’s mortgage? You said the house value has gone up by £175k but didn’t mention how much she owes.

Even if your tenant pays nothing I’m fairly certain you’ll be taxed as if the tenant pays full rent. So it would cost you money to keep a roof over your mum’s head. Not to mention the cost of maintenance, which could be significant. Of course in the long run you’d probably still be better off due to having the £175k equity. Just be aware that there would be ongoing costs on top of the mortgage. And you’d be forking out to keep your mum in a big house while you’re squashed into a flat.

Also if your mum needs care later on then selling her house to you for less than market value would be classed as deliberate deprivation of assets, and there’s no time limit on that. You could well find that the local authority chases you for that £175k, even in 20 years time.

And undoubtedly your sister will think she’s entitled to half of that £175k equity. I don’t see how you can say there’s no inheritance? There’s £175k! And even if your mum had to pay her debts there would still be £100k.

Imo it would be better for your mum to sell the house for market value and spend the rest (even if she “spends” it by giving you and your sister cash in hand on a regular basis).

Houseonahill · 28/10/2018 21:22

Could you and your sister buy it between you so it would be both of yours to split in the end? (Genuinely don't know if that's even a thing)

Also if you can do that and aren't willing to then you are definitely stealing her inheritance, how would you feel rolls reversed?

Flip

1 2 3 4 5 6 ··· 20 21