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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

More a WWYD re- Parents and money

120 replies

PyongyangKipperbang · 04/04/2022 23:19

Been at work and thinking about it all evening.

My parents spoke to my sister and I recently about how they want to gift us some money. They are planning on giving me enough to may off my mortgage (2 years to go on a small mortgage) and the same to my sister to cover the house improvements they need or to go towards their mortgage (not long moved so a lot longer to run).

The thing is, my sister and I really dont know whether to take it. It feels wrong but I cant work out why.

The are doing equity release which straight away we didnt like but they are doing it through a specific scheme which is not one of those "back pages of the Daily Mail" jobs, the numbers have been crunched and they will still have a sizable ownership of their house and it isnt as dodgy as sister and I first thought. Their reasoning is that they would rather us have some of our inheritance now when we need it (I lost my job due to covid and need to retrain to earn anything more than NMW and my sister has had to "downsize" her career from management due to covid too).

But.......it just feels wrong! I know that my mother especially would feel a lot happier knowing that we are financially secure. I would own my house outright which would mean that whatever happens I would be housed if nothing else. My sister would have the pressure taken off in terms of finding money for house improvements that are desperately needed and they could afford when they bought the house just a few months pre covid. Security is a massive thing for my mother and knowing we had that would help her sleep at night.

It never occurred to either of us that they would do this so we are both in shock. I think they expected more of an enthusiastic reaction but we were both quite reserved, I explained it wasnt because we are ungrateful but that we have some doubts and feel a bit wobbly about it all.

The irony is that if I could do this for my adult kids I would in a heartbeat so I totally understand where it is coming from. My sister is childless not through choice but I know she would do it for my children who she adores.

I am just so torn!

And yes, I do think pride is a big part of it for both of us.

OP posts:
ScrumptiousBears · 05/04/2022 09:42

I would not accept money from my parents equity release. Prices are massively going up now on fuel, shopping and everything else will
Follow, and we don't know where it's going to stop.

Is downsizing an option? It's not the accepting of money that I'd be wary of, it's equity release. They are paying interest to help you and your sister live which is not a good and fair option in my opinion.

sunshineforest · 05/04/2022 10:45

[quote Obelisk]@sunshineforest He may be and a product like that is definitely less hair-raising than ER (obviously assuming the parents can make the interest payments with ease), but it's still not clear to me that this would be better than eg just giving the daughters a joint monthly sum equal to whatever the monthly interest would be. Depends on individual circumstances.

(I'm also not a financial advisor btw!)[/quote]
Agree, and I would be uncomfortable with this too

nokidshere · 05/04/2022 12:09

Don't do it!* My parents did equity release.* When they got very elderly they needed to sell up and move near me so that I could care for them. They didn't have enough money to buy a new property!

My MIL had an equity release loan on her flat, when she moved into the house next door to us the loan transferred with her despite the property being more expensive. When she died 14 years later there was enough money to pay off her equity release loan and our mortgage. It's about getting sound financial advice, just like any other product.

On a practical note I wouldn't want to be sorting out and paying back loans when your parents have passed, much better to own the house outright. It took no more effort than a form and a telephone call.

Equity release is NEVER a good idea. It can be for some people. It's just a mortgage payment that you don't make payments on till you die.

I absolutely would not be advising someone for whom ‘security is very important’ to get into an equity release situation. The ‘rent’ they would effectively have to pay for the share of the house they no longer own will be a cause of endless anxiety as they age. And will certainly eat into the money available for care/inheritance later down the line.

What rent? The new equity release schemes allow you to make interest payments if you so wish but generally there are no payments due until the property is sold. And if the parents are giving the money now they already know that there will be nothing later.

I'm not a mortgage advisor or anything financial I'm just telling how it was from our point of view. It was professional from beginning to end, someone was appointed to MIL to make sure she understood the implications of what she was doing and they spoke to her alone to make sure we weren't coercing her into anything. The interest rates were higher when she did it, around 6%, but there was enough money to cover the loan and some for us when she died. She had no actual money, just property and a pension so it was a good solution for her. Had she just sold her flat she wouldn't have had enough money to move and she would have been lonely and we would have been stressed with her being 2hrs away.

Like everything else the way to do these things are with proper planning and research of all available options.

Nothappyatwork · 05/04/2022 12:17

The trouble is they basically paying twice for the house they’ve already paid their interest to the bank to pay off the mortgage once and now they’re going to pay off the I would imagine premium interest to the Equity release company when the property is eventually sold.

Just seems like a really bad idea to me

Walkingalot · 05/04/2022 12:47

What if, in the future, one of them has to go into a home and the other no longer wants to live where they are? Have they thought about this? It's lovely that they want to help you but neither of you are desperate and it's an unnecessary risk, tying them into an equity deal.

Soontobe60 · 05/04/2022 14:08

@WulyJmpr
It’s not completely untrue!
www.raisin.co.uk/taxes/gift-tax/

Soontobe60 · 05/04/2022 14:14

My mother took out equity release, ie a lifetime mortgage, in 2016. She borrowed £27K. At the time, her house was worth around £150k. She moved house twice and her most recent house is worth £100k.
She died in February. The current amount due on the mortgage is £38k. That’s 11k in 2 years. That interest is increasing exponentially. We can’t sell the house even though my stepfather is now in a home as he doesn’t have capacity so we would have to apply to the Court of Protection. The LA have said they can put a charge on the house to fund his care, so by the time he dies all his money that’s tied up in the house will either be used to pay for the mortgage or fund his care.
I personally would not take money off my parents in the circumstances you’ve described OP. You really don’t know what the future will hold for them!

Soontobe60 · 05/04/2022 14:16

@nokidshere

It’s not the same as a mortgage in that because you’re not paying anything off, the interest accrued will be massive the longer you have the loan for. You’re making it sound like it’s an investment, when actually it’s a license to burn money.

Blossomtoes · 05/04/2022 14:22

[quote Soontobe60]@WulyJmpr
It’s not completely untrue!
www.raisin.co.uk/taxes/gift-tax/[/quote]
It is. You can give any amount you like and, as long as you live seven years afterwards, there’s no tax liability. If you die sooner, your estate might have to pay some inheritance tax on it. In any event even that is tapered.

pointythings · 05/04/2022 14:23

@Soontobe60 that link just tells you that if you give more than £3k and then die within 7 years or less, it's subject to IHT. That's completely different from the gift being treated as income subject to income tax.

tkwal · 05/04/2022 14:31

Only going by what my financial advisor told me, I live near Belfast which IS in the 🇬🇧

nokidshere · 05/04/2022 14:39

It’s not the same as a mortgage in that because you’re not paying anything off, the interest accrued will be massive the longer you have the loan for. You’re making it sound like it’s an investment, when actually it’s a license to burn money.

Of course you are, just at the end of it instead of during. My 100k mortgage cost me way over 160k and that was paying it off 8yrs early.

Every loan you take will cost you money whichever way you pay it. If the equity in your house is there then, for some people, it makes sense to use it.

Cloverforever · 05/04/2022 14:53

Loads of misinformation here. I really wish people would only post if they know the facts.

Blossomtoes · 05/04/2022 14:56

@tkwal

Only going by what my financial advisor told me, I live near Belfast which IS in the 🇬🇧
I’d be very wary of taking financial advice from someone who’s misinformed you about something so basic.
Nothappyatwork · 05/04/2022 15:34

@Cloverforever

Loads of misinformation here. I really wish people would only post if they know the facts.
If that happened Mumsnet would closedown overnight 🤣
Cloverforever · 05/04/2022 15:49

@Soontobe60

My mother took out equity release, ie a lifetime mortgage, in 2016. She borrowed £27K. At the time, her house was worth around £150k. She moved house twice and her most recent house is worth £100k. She died in February. The current amount due on the mortgage is £38k. That’s 11k in 2 years. That interest is increasing exponentially. We can’t sell the house even though my stepfather is now in a home as he doesn’t have capacity so we would have to apply to the Court of Protection. The LA have said they can put a charge on the house to fund his care, so by the time he dies all his money that’s tied up in the house will either be used to pay for the mortgage or fund his care. I personally would not take money off my parents in the circumstances you’ve described OP. You really don’t know what the future will hold for them!
I make 2016 to 2022 to be between 5 and 6 years, not 2!

It may have cost you (as the person inheriting?) £11,000 but I'm sure you wouldn't have deprived your mum of that £27,000 if it improved her life?

Original poster
PyongyangKipperbang · 05/04/2022 16:04

@ThinWomansBrain

they worked and saved for years to enable you and your adult sister to live beyond your means. Nice.
What the hell are you talking about?! I have lived well within my means for many years, as has my sister. At no point has either of us expected any sort of hand out from our parents. We are aware that they have the house and savings etc that the may leave to us, but we are also all aware that these may be needed for care costs so no expectation there either.

As it is I am going to say "Thank you but no thank you", as I am really not happy with the arrangement. As PP have said, if they had it in savings or where downsizing and giving us some of that then I may feel better about it but I am not at all happy about the equity release.

OP posts:
nokidshere · 05/04/2022 16:17

As PP have said, if they had it in savings or where downsizing and giving us some of that then I may feel better about it but I am not at all happy about the equity release.

It doesn't matter if you are happy about it or not? Only if they are. It's not your decision really unless you have power of attorney.

I really dislike this infantilisation of adults who have clearly managed to live for 70yrs perfectly well. Older people don't generally just lose all brain cells and common sense when they hit 70. If they want to discuss it with you, or ask you to help them check the pitfalls then fine.

Original poster
PyongyangKipperbang · 05/04/2022 16:25

Theyre only doing it to help us out, so if we refuse the money (which in all honesty I would probably do even if it was cash from their savings) then they wont do it, they have already said that.

OP posts:
Blossomtoes · 05/04/2022 16:28

You’ve missed the point quite spectacularly @nokidshere. The equity release has only been mooted to give money to adult kids. If said offspring refuse the money, there’s no point in releasing the equity. It’s an incredibly bad idea.

nokidshere · 05/04/2022 16:46

@Blossomtoes they give it to them now or they get it when they are dead. its still their choice. If the children dont want it maybe they will still do it and spend it themselves. Either way its still their choice.

nokidshere · 05/04/2022 16:48

ok so i missed the last post from OP. So they wont do it and its not an issue anymore? whats the problem then?

Maybe they feel that they would rather do that than have to spend it on care so their children wont get anything, lots of people do.

Obelisk · 05/04/2022 17:13

Of course you are, just at the end of it instead of during. My 100k mortgage cost me way over 160k and that was paying it off 8yrs early

You’re missing the effects of compounding- interest on interest. That’s how people end up with such huge debts from tiny loans.

SeasonFinale · 05/04/2022 17:18

Equity release has absolutely stuffed by friends parents. When their Dad died there simply was not enough equity to allow their mum to sell up and downsize to a property near the grown up kids which is what she wanted to do and she was left in an area she no longer wanted to be in.

Nothappyatwork · 05/04/2022 17:21

@nokidshere

As PP have said, if they had it in savings or where downsizing and giving us some of that then I may feel better about it but I am not at all happy about the equity release.

It doesn't matter if you are happy about it or not? Only if they are. It's not your decision really unless you have power of attorney.

I really dislike this infantilisation of adults who have clearly managed to live for 70yrs perfectly well. Older people don't generally just lose all brain cells and common sense when they hit 70. If they want to discuss it with you, or ask you to help them check the pitfalls then fine.

Well that’s clearly not true otherwise the police wouldn’t consider the elderly to be extra vulnerable to schemes and takes a dimmer view of anybody that takes advantage of them.
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