AIBU to take all the equity?

[HalfwayCrook]

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?

Strongly suggest she gets financial advice for herself and you should use the money you would otherwise have spent on the mortgage to invest so that when you do decide to move to a bigger place you have a nice deposit built up.

I dont even know how you will get a mortgage for this. If you already have a mortgage your income will need to sustain both yours and the new mortgage. You won't get a residential mortgage as you won't be living in it and a BTL mortgage will be no good with a relative in situ. If your mum gets ill this could be deprivation of assets meaning care home fees won't be paid. You won't be able to get a larger mortgage to move without salary increases and you will need to pay double stamp duty. That is without the problems of the sale price being lower than the value of the property, your mum defaulting on debts and your sister being deprived of any inheritance. Even if she refused to do this (for good reasons I think) that does not mean she is not entitled to any of the equity in the family home. What does she say? Is this not going to affect yours and your DMs relationship with your sister?

If your mum is bad with money that is likely to continue into retirement. If you and your DH split who will cover mortgage payments then? Same if one of you dies or you have children and are on maternity leave or if either of you get sick or lose your job. This is a minefield and all for the sake of your mum not honouring her debts and being bad with money and you thinking that you will get your hands on the equity.

Interest only is an excellent choice for her.

She's only committed to paying the interest. She can build up capital and repay what she can when she can over the next ten years. By then she'll probably be keener on downsizing anyway.

What's not to love?

Hmmm. As I see it if the house isn't sold to you then it will need to be sold to somebody else. Whether you want to lumber yourself with that much debt and continue living in a one-bedroom home is completely up to you. As I see it, if you buy the house for the price of the mortgage, (effectively paying of that amount of debt) then when you mum eventually dies the right thing to do would be to give your sister half the value of the house less the mortgage amount remaining and any mortgage payments you had made. However, you wouldn't be able to do that without selling the house unless you have a lovely pot of money elsewhere. Also, it sounds as if when your mum does die she will die leaving debts and these debts should be paid for out of her estate. If she doesn't have anything to leave then there won't be anything to pay her debts with.

I confess I'm not exactly sure how equity release works, but I have a feeling that this might be a better way to go, she would have some money available to settle debts after the mortgage is paid off. It does mean that neither you nor your sister would have anything from the sale of the house when your mum dies, but it does mean that you wouldn't have to worry so much about all the money she owes.

If she does manage to get approved for another 10 years interest only could you encourage her to overpay (if allowed) or start saving to help repay the capital.

If she can get a 10 year interest only mortgage then that would be a fantastic outcome. She’ll be building up equity, living cheaply in her home and buying a lot more time before she has to downsize. This is really the best outcome for everyone.

I cannot believe how selfish your being. The only person that benefits from this in the long run is you

You think your sister isn't entitled to inheritance because she lived rent free for 15 years. You sound very petty. She is entitled to half.

I hope you do go through with this and it goes tits up, everyone is telling you not to go through with it but your being blindsided by the money you can profit with this

I'm glad your not my daughter or sister