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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:
Dollymixture22 · 28/10/2018 21:23

Downsizing is an option. Your mum is being selfish. She must know of she digs her heels in you will resume her.

She will have £100k after the debts are paid off - would that buy a one bed flat in your area?

user139328237 · 28/10/2018 21:24

This is one of the few times I believe equity release can make some sense if she doesn't want to downsize.
I can't actually believe you expected your sister to buy a house for your mum to live in rather than for herself.

Soontobe60 · 28/10/2018 21:25

Your mother should sell the house if she cannot get a mortgage on it, and buy somewhere else to love with the equity. I'm assuming she's a completely capable adult, but just likes to spend money she doesn't have? My honest opinion? It sounds like you're planning to buy the house at a bargain price which would mean that your mother would have no money to pay for any care home fees should she need it, nor will your sister have any inheritance. Your DH, in the other hand, could end up with the lit should you die before him!
I'd be furious if I were your sister.

thereallochnessmonster · 28/10/2018 21:26

You need proper financial advice. See an IFA with your mum. And take your sister along. There should be complete transparency.

Wauden · 28/10/2018 21:27

I get that the sister lived there rent free etc so you might think she has done nicely out of it but I doubt I doubt that it would be a defence. I am not a lawyer but I sense a legal problem or four here.

Walkingdeadfangirl · 28/10/2018 21:27

If your serious, you really need to discuss this with your sister and the implications of zero inheritance, your mother getting turfed out or you shouldering all the burden indefinitely.

I am sure you could find an acceptable formulae for your sister getting some inheritance eventually.

(£175k equity minus ALL costs buying & maintaining the house & your mother) divided by 2 minus 10/20%, off your sisters share, for every year you subsidise your mother living there rent free.

MyKingdomForBrie · 28/10/2018 21:28

Your mum should sell it and keep her 175k less debts. You're basically trying to get yourselves a massive lump sum at some distant point in the future - just don't do it. Too messy and risky and you may at some point really regret having that large outgoing that you can't get rid of.

Original poster
HalfwayCrook · 28/10/2018 21:28

No if left to her own devices, DM will do equity release or get some form of ridiculously high interest arrangement. Without our involvement I am certain there will be no equity or inheritance to speak of.

DM has said that she will gift it at value of mortgage only otherwise this is not feasible for us financially. She will do anything it takes to stay in the home. This is not us just secretly trying to take the 175k, it is being offered of course.

The reason I am saying that DSis gets nothing is that without us, there is no inheritance to speak of?

If we divorce, I would suppose we would continue to pay the mortgage together or come to some other arrangement, it is not a big issue. DH is very close to my DM and would not want her to leave the property anyway.

OP posts:
CrunchyNutcase · 28/10/2018 21:28

Regardless of family relationships, if you are thinking about doing this, I strongly suggest you get professional advice. There’s something called the pre owned assets tax that could well apply here even if there’s no IHT issue.

Jeanclaudejackety · 28/10/2018 21:29

Your mum needs to get over it it's just a. House, a building, she needs to sell up and buy a little flat, use the money she makes to pay off her debts and live more simply

bertielab · 28/10/2018 21:29

Because if she goes downhill and needs care -they will look back 7 years ago and she will be deemed to be making herself poorer and you will have to have the care costs if needed.

Also your sister could contest it at that point and demand half the house.

This has got red flags all over it. Fine -let her crack on with it then if she won't sell.

£315, 000 -takes into account everything car etc........ANY assets. Anything within 7 years is a huge problem.

Who is going to pay funeral costs etc. What happens if house prices suddenly rise or fall and she is over the £315K -just speak to any good solicitor and then will tell you not to touch it. What happens if you and DH lose jobs and can't pay mortgage and want to sell and she refuses. Just don't do this.

Of course she has a choice -she just doesn't want to do it. Somewhere smaller -like your flat? is a better option for her.

And yes,you are stiffing your sister and it could come back and bite you hard.

Cherulewis · 28/10/2018 21:30

This is the worst idea ever.

You are enabling her. She should sell and downsize.

Yes I am sure lots of people would love to stay in a family home but sometimes we have to realise that that is not possible.

You are shafting yourself from being able to move too.

She is in her 60s she could live until her 90s. You are committing yourself to bailing her out for the next 20 years +.

I would speak to a financial adviser and be aware of all the legalities but I think you are crazy to even consider it. I say this as someone who spent her childhood being the child sent to answer the door to the debt collectors, watched my parents be shit with money their entire lives and had to downsize after 30 years in the family home. Yes, I could have bailed them, but if you are bad with money it never stops. Your Mum could accrue even more debt than she has now.

BritInUS1 · 28/10/2018 21:31

Please go and get professional advice, this is a terrible idea for many reasons - such as 1. deprivation of assets, 2. legalities of transferring to you at below market value, 3. stamp duty, 4. tax implications of letting her live there rent free, etc, etc, etc

Bodear · 28/10/2018 21:31

If she ever is bankrupt due to the other debts she has this will be looked at as a Transaction at an under value and you’ll have to repay the £175k into the bankruptcy estate, or give the house back. Are you sure she’s going to pay off the debts?
Also, your sister should get half of the current equity, otherwise you’re royally fucking her over.

HauntedPencil · 28/10/2018 21:32

You need to meet with your sister with your mum and discuss it.

It sounds like you are just doing this to secure your inheritance and I think it's a really risky/bad idea and if I was your mum I wouldn't want to take the risk of you defaulting either.

If I was your sister and given no input into it before it was done I'd be really really annoyed. She deserves a say not just in the inheritance but also a decision that impacts so greatly on your mum whilst she is alive.

NataliaOsipova · 28/10/2018 21:33

Sorry - repeating myself due to computer issues!

If your mother needs care, the house will be valued at its market value and the equity you have will be seen as a gift. If she requires that money for her personal care, this may be taken into account.

SputnikBear · 28/10/2018 21:33

It sounds like you're planning to buy the house at a bargain price which would mean that your mother would have no money to pay for any care home fees should she need it
You can’t sell your home cheap then claim you have no money for care home fees. The local authority would pursue the buyer for the rest of the market value of the house. Which is why this is risky for OP, because she could spend years paying for this house and then wind up being sued for the £175k because DM needs care.

SassitudeandSparkle · 28/10/2018 21:33

Ah, well if you are not trying to take it secretly then you and your mother will be discussing this with your sister beforehand and taking her views into account? Beware of CGT too.

There is no way you are going to come across well in this tbh, OP. Even if your sister was happy to forgo her share in the 175K what about your mother? She's losing out too here.

MaryPoppinsUmberellaHandle · 28/10/2018 21:34

Without our involvement I am certain there will be no equity or inheritance to speak of.

You keep repeating this. Why does it matter? Why are you looking for ways to not repay any of your Mum's debts?

You have made it perfectly clear that you're planning for the huge lump sum in future, yet the one person your Mum isn't being protected from, is you and your Husband!

Tistheseason17 · 28/10/2018 21:35

The more you post, OP, the more it looks like you're after the inheritance and getting money in the future and not with your sister.

Your mum should def do equity release. It gives fairest outcome.

Think it is a sad state of affairs if as adults we are considering someone's death will financially benefit us.

OP - You need to focus on getting yourself a new place and not thinking how you can profit in the future from inheritance.

Original poster
HalfwayCrook · 28/10/2018 21:35

I can't buy joint with DSis as I said in the OP she has maximised her mortgage to over 4.5 times her salary whereas we live in a 1 bed. No 100k would not buy anything around here.

Well DSis has a big salary and has chosen to live with DM for 15 years so it made sense that years ago she could have bought the property cheaply and helped out that way whilst having an investment. Or could have done what we are proposing to do. Can people explain why DSis should get half the equity with no input and having refused the house first?

Walkingdeadfangirls proposal sounds the most sensible to me so far...

We have spoken to professionals and no red flags have been proposed so far but of course only initial meetings so far.

DM will not be getting into more debts and will be able to pay them off (long story).

OP posts:
Dollymixture22 · 28/10/2018 21:36

But surely there would be an inheritance. Without you your mum would be forced to sell the house. She would settle her debts and have some money left over to buy something small that she could afford the uokeep of.

If you mum really is a hopeless as you say then regardless of what you do she will run up vast sums of personal debt. While your motives are to help your mum, you clearly also see you are screwing your sister over. Unless you would be happy to give your sister £50k now? Or agree to give her £50k when you eventually sell up? Get a solicitor to draw up papers?

If you do divorce, do you really think it’s reasonable to expect your husband to continue to pay this mortgage? I know people who considered doing something along these lines (although they would have moved in). Luckily they dovericed before anything was agreed as it would have been a huge mess.

Original poster
HalfwayCrook · 28/10/2018 21:38

DM is keen on the idea - she does not want the equity and has no interest in it, she herself has said this. Of course this will be discussed with DSis in advance I am just considering the idea for now and looking into feasibility first.

OP posts:
SassitudeandSparkle · 28/10/2018 21:39

Why should you get the whole value without paying the whole price?

Jlynhope · 28/10/2018 21:40

Your mom needs to be an adult and settle her debt herself.
This is a potential disaster.