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?

Sorry posted too soon.
Not ideal if having financial difficulties, plus it sounds like your mum would do everything to make you keep her house so I’m guessing it would be you who sold not her.

Would you be happy moving to a cheaper area?

It may be possible but you need to look at it from the position that it isn’t the same as one big mortgage.

It sounds like your mum has got you under a load of “fog” - fear, obligation and guilt.

Has she actually “threatened” you with this whole idea about her using an equity release scheme in a passive aggressive way? ie made you feel guilty that she’d HAVE to go down that road etc etc.

Your mum knows what she’s up to. She sounds very manipulative.

She’s worked out a very cushty life for herself. Not many people just have to manage to pay their bills and no housing costs... What happens when / if she can’t afford the bills?

If she wanted to turn over a new leaf financially she would agree to downsize. Instead she's willing to drag you into this.

I will look into deprivation of capital as people are saying that there is no time limit. Would they also take the money we put into it as well as the equity as that seems very unfair? If it is deemed that it is fair to give up the equity for DM's hypothetical care then I am ok with that.

It will depend how they view it. If they view it as your mother's house then all of the equity could go toward house fees.

DH's cousin bought his mother's house years ago when she was widowed so she didn't have to move. He's done ALL of the maintenance over the years, but the LA have slapped a charge on it for care home fees and it's costing him a fortune to fight (and he may lose). As LA budgets get slashed more and more they'll get more vociferous about protecting their budgets.

Yes if it is out of DM's house and 100% has to be sold, then she would accept that. But she would never sell it of her own accord. She will find some high interest scheme and has form for being conned before!

In the nicest way - her stubborness and failure to accept responsibility is why she, and potentially you, are in this mess.

Thanks yorkshiremummy will have a think about those red flags. I am very open to holes in this plan - just that professionals have not yet come forward so am seeking input from Mumsnet!

Bear in mind that many professionals you see will have a) a vested interest and b) no experience in some parts of the situation.

If it is liable for gift tax that is fine, she would have passed away so the house would be sold and tax paid surely?

So in financial difficulties, we could downsize both houses no? Or just both be forced to move to a cheaper area. Of course DM would have no choice but to accept in that situation.

Two things. Firstly - how long would that take you? You could end up bankrupt with two repossesed houses.
Secondly - what makes you think she'd be more accepting of the situation then than she is now? She's currently planning on dodging 75k worth of debt and living rent free from you for the rest of her life - where in that is a reponsible adult who'd accept moving later when they won't now?

She will find some high interest scheme and has form for being conned before!

Do you see what I mean, OP? You can't guarantee she will stay out of financial trouble, however good everyone's intentions.

Fair enough, I can see you are trying to help
your mum stay (which is lovely) but in terms of a good financial decision, it isn’t.

However, lots of people put themselves out financially to help family and there isn’t anything wrong with that but just go into it on that basis rather than trying to convince yourself it’s a good move financially

So people are in consensus that even though we are taking the hit and she refused to, the equity should be split 50/50 between myself and DSis?

I'm honestly starting to wonder if his thread's a wind up. There's no "consensus" because almost nobody's addressed the issue of an equity share - and the very good reason for that is that the proposal is so utterly unrealistic anyway

You've mentioned some situations in which DM would have to confront the need to sell, but the reality is that she's already in that position ... so why not just let her get on with it

Kardashianlove, well yes if we owned the property we would be the ones selling not her? She would not do everything to keep the house in that way i.e. standing her ground and refusing to leave, getting us in a mess! Just in the sense that she will take an awful financial deal to do so rather than downsize.

Well I would not be happy to move to a cheaper area but that would be life really. Plenty of children have had to move house and school.

Another one who thinks this is a terrible idea from a lot of angles, financially and practically speaking there's so much that is likely to go wrong with this setup it's hard to believe anyone would think it's a sensible idea.

I suspect it all stems from OP trying to fix years of financial incompetence in DM - OP, you can't, and you're not obligated to. Step away and let her sort out this impending car crash that's been looming for years. Don't let her drag you and DH with her.

No way is DM manipulative, she is the opposite and is very happy that we have offered this. As I said she is happy to pay the mortgage for us but that has tax implications and seems unfair so that is not an option for us. We are happy to take some sort of hit in order to help her financially if it comes to that but not to the extent of losing our repayments!

It is plain as day this will backfire badly at some point in the way that schemes derived from greed and conniving always do.

I think you are a disgraceful person for even considering fucking your Sister over like this

Yep.
And not wanting to involve your sister until it's a done deal just confirms this. Lining your own pockets at the expense of everyone else is clearly the driver here. Protest all you like but you are NOT helping your DM at all as I'm sure you know. No amount of pretty packaging changes that.
The fact that your sister didn't do the same thing puts me clearly on team sis.

Not until it is a done deal but only if we have looked into it fully and think it is viable from our side! I don't think it is worth having a discussion if it is not even a possibility.

What you should do is suck up the fact that your dm isn't great with money and will use up all the equity. Then let her get on with it and move on. Buy a house with your DP and Iive your own life. You're not entitled to an inheritance.
At least that way you will end up maintaining a relationship with your sister, which is a valuable thing in itself.

Quite honestly OP I think you have seen ££££ and ran with it. This is so so messy and there is no outcome where someone doesn't end up hurt. Just don't do it.

You contradict yourself alot, you say your mother wants to make amends and won't be getting into further debt, wants to better herself etc but go on to say she absolutely won't sell the house and will get herself involved in some silly scheme to keep it?! The fact that she would be happy to accept her children living in a small 1 bed property and unable to move to enable her to keep her family home just baffles me.

Just take a step back and forget this whole thing.

With equity Release you have to seek legal advice and a solicitor has to sign documents to state they have ran through all the legal aspects and that the client is happy to proceed.

You can pay the interest on equity Release so the capital never increases. Your mum could take the money to clear the debts, you and your sister could cover the yearly interest between you and when the house is sold, your sister and you ca share the equity left behind

Plenty of children have had to move house and school. Yes, but when it’s your children moving house and school it’s a whole different matter. Especially when the situation was avoidable. You then have the problem of choosing to move your kids or your mum, obviously not an easy decision.

Yes, you would be the ones selling not your mum but from what you have described she doesn’t sound the most sensible or reasonable when it comes to her house so I’m guessing it would put you in a difficult position and wouldn’t be a case of ‘just sell’ presumably there would be a lot of guilt involved. Obviously you know her best though and whether she would just ‘let’ you sell with no issues if you wanted/needed to.

I am so confused. Why on earth would you buy a house for your mum to live in rent free, while you spend your adult life in a one bed flat? She could live 40 more years! You are bonkers.

I agree dawnacorns - that is the truth, I am struggling to sit back and watch DM lose the house like she has done with other things in the past. We are not at all entitled to an inheritance I agree!

Of course your mum’s very happy about this.....!

She would not do everything to keep the house in that way i.e. standing her ground and refusing to leave, getting us in a mess!

Why not? After all she's already prepared to see you trapped in a 1 bed flat, potentially getting yourself into a horrific mess in order for her to keep it

No you should not split the equity share bw you and your dsis because it is not your money, it belongs to your mum. Just because she doesnt need it now (and actually she does because she has debts) doesn't mean she wont need it in the future. Just because she wants to stay in her house and is happy to hand over the equity to you doesn't mean you should take it.
What.is.wrong.with.you?

How have you logically gone from 'she will not downsize' to 'we'd sell out from under her and make her downsize'?

You're desperately searching for a way to do this sensibly, but it doesn't sound like that exists.

Yes MrsVietor it is a big ask which is why I am thinking we need to get something out of the arrangement ourselves i.e. at least most of the equity? But posters are saying that this is not fair.

It's waaaay more than a big ask