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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To consider buying parents out of equity release

79 replies

Sonrien · 12/04/2023 10:27

I've just found out my parents have taken out an equity release on their house.

It's for a really small amount but at a very high interest rate, which would see the proportion that the equity company own escalate from 1/5th now to pretty much all if it within 20 years. There's also a big early repayment penalty.

In principle I would like to help them get out of this so they can keep some house equity for future care/inheritance etc. However I'm also nervous to get involved in their crazy financial situation- they have no pension savings, believing the state pension will be fine - but are still spending all their income in their last few years of working- eg going on weekends away, cruises, buying a new car on HP etc.

I'm really not sure whether helping is an investment or a risk. (Aware there'd be legal advice needed and legal documents for buying a portion of house etc).

YANBU - help them if you can as you'll keep the house in the family

YABU - leave them to it - to much stress, risk and unpredictability

OP posts:
PeonyFairy · 12/04/2023 14:08

It sounds like they are reckless with money. The only way I would do it would be to buy a share of their house and have them use the money to pay off the loan.
My parents looked into this years ago. They were not well off and had no savings but owned the house. My sister and I persuaded them it was a financial mistake and promised we would help out if they needed a new roof or whatever.

Tinkerbyebye · 12/04/2023 14:15

YABU. They are adults, it’s how they choose to live, they will have to accept consequences when older if they have no money

just accept there will be no inheritance and leave them to it

mumda · 12/04/2023 14:18

Tealsofa · 12/04/2023 10:32

Don't do it!

If they are not financially aware, they'll do it again and again

future care/inheritance

You can pay for care if you want, but why gamble on an inheritance with your own money

This,
Unless of course you pee money.

Original poster
Sonrien · 12/04/2023 15:01

 I do not @mumda

OP posts:
Original poster
Sonrien · 12/04/2023 15:02

Ooops lost my Grin emoji

OP posts:
TheNoodlesIncident · 12/04/2023 15:40

The choice is ultimately if you can afford to fund them then consider it, but if it will leave you financially disadvantaged then don't.

No no no. This is a perfect example of throwing good money after bad. YOUR money!

You can't stop other people making poor financial decisions, so don't get involved.

proppy · 12/04/2023 15:45

If you are going it to "save" your inheritance I wouldn't. It will just cause resentment if they do it again

Ourshoddyhouse · 12/04/2023 16:33

My parents have done similar, I don't know the full details they are so shit with money I worry about them.

Murdoch1949 · 13/04/2023 06:00

Your have admitted that your parents are basically spendthrifts. If you buy out their equity release, what's to say they won't do it again, or run up big credit card debts? They're not your responsibility. Save your money.

billysboy · 13/04/2023 06:14

My in laws took one out a few years ago for £100k a quarter of the houses value

they now owe over £250k and are likely to live for another 5 years at least when this amount will probably double

they still spunk their money on stupid shit despite me paying for their heating oil for the last 3 years as they were shivering in one room despite living in a 4 bed house

i tried to talk them into downsizing many years ago and they flatly refuse and continue to do so

i have weighed up buying the loan out in order to stop it compounding further but have decided to invest the money elsewhere and retain control of it

it’s tough but they are just shit with money so I am staying out of it

Magaluf · 13/04/2023 06:17

You may well find that early exit comes with enormous fees, if it’s possible at all.

Sounds like they’re not able to be good with money and, even if you paid everything off (would this be a gift or a loan?) they’d be straight into another ER deal. It’s not something you can fix. I would work on the basis that there will be no inheritance.

PurBal · 13/04/2023 06:33

@Sonrien I’m so sorry to hear this, ER is a terrible “product” that imo used to scam vulnerable people and I genuinely believe they should be made illegal. But it’s too late now and you should leave them to it.

@billysboy downsizing is hard with ER. The bank owns more and more every month. Trying to purchase a property with an ER is also a nightmare, our chain almost collapsed (additional lawyers involved retained by the ER company with no incentive to proceed, nearly lost our AIP as took so long). We considered walking away and if I hadn’t been heavily pregnant at the time we would have!

BlastedPimples · 13/04/2023 06:40

The stupidity of doing equity release amazes me. It's like self sabotage.

Op, I would just leave them to it. There's nothing you can do.

My dad has done equity release. He's basically sold his £250k flat for £25k.

For the first time in his life, he was financially secure and then he goes and messes it up.

Rightsraptor · 13/04/2023 07:07

Definitely do not involve yourself in this, OP.

Your parents took this agreement out without talking to you first. I know many here will say 'why should they?' and that's a valid point - they are adults after all. But it shows something about their relationship with you. And I imagine they didn't discuss it with a financial advisor either. So - not good.

You say they still work, and you imply they don't yet get the state pension, therefore I imagine they're still reasonably young in terns of what we're talking about here. Yet they have taken equity release! Far too early, by the sounds of it, if one must do it at all.

I can certainly see why you're worried about it, but please do not involve yourself in their mess. When they are in a financial pickle later on, and they will be, I'd directly pay their heating bill or something like that if you can. Don't put money in their hands. At least then you'd know the money was being used for a proper purpose.

trulyunruly01 · 13/04/2023 07:16

MIL did this, took £25k in 2003/4, whilst living in a 3 bed semi which was totally unsuitable for a person to grow old in. Fast forward 16 years and she was struggling to stay in the house due to the slope it was on, no flexibility in layout for a downstairs bedroom, only a small toilet downstairs etc. she could have moved and transferred the equity release but the company were very picky about what sort of property they would allow.
Luckily, we were able to sort out paying off the equity release and help her move to a retirement property (where no equity release was allowed). We had to pay off £77k on sale day.

NeverDropYourMooncup · 13/04/2023 07:22

PurBal · 13/04/2023 06:33

@Sonrien I’m so sorry to hear this, ER is a terrible “product” that imo used to scam vulnerable people and I genuinely believe they should be made illegal. But it’s too late now and you should leave them to it.

@billysboy downsizing is hard with ER. The bank owns more and more every month. Trying to purchase a property with an ER is also a nightmare, our chain almost collapsed (additional lawyers involved retained by the ER company with no incentive to proceed, nearly lost our AIP as took so long). We considered walking away and if I hadn’t been heavily pregnant at the time we would have!

That's why they hired Carol Vorderman to do the daytime TV adverts - the 'nice woman from Countdown who was so good with Maths' made so many people trust it.

bellabasset · 13/04/2023 07:28

Do it by way of buying a share in the house so if its worth £250k and you pay £50k then your signature would be needed for any future loan. Get legal advice

Hadalifeonce · 13/04/2023 07:35

My FiL took out ER several years ago. SiL needed money, which he could have afforded to give her, but he decided he needed to give her siblings the same amount, despite us advising him to just adjust his will.
He is only able to pay off a certain amount per annum as a lump sum, the penalties to pay off more are quite prohibitive.

Charlieiscool · 13/04/2023 07:40

I’d help if I was able to take over ownership of their house. Could you buy back the ER and then they sign the house over to you? Instead of it being owned by the scamming bastards that Carol Vorderman advises people to get involved with, it would be owned by you. It would be secure for them and for you. It’s a pity they didn’t sell you part of the house before, when they needed money, instead of signing it away on terrible terms to the ER company.
When my elderly parents saw these adverts they genuinely thought it was a charity to help old people. These firms and the way they advertise are absolute bastards.

FrenchandSaunders · 13/04/2023 07:46

ER isn’t always a bad idea. Although in this case OP I wouldn’t get involved!

My mum did ER in her late 70s. Her pension was very small and she had very little money for everyday niceties. This extra money enabled her to eat out every lunchtime at a local restaurant (she hated cooking), and potter around the charity shops buying little things.

This was her daily routine until her mid 80s when she has to go into a care home. She still owned a percentage of her home so was able to choose a decent place …. she funded it for a couple of years and then the council took over payments.

If she hadn’t done ER she wouldn’t have enjoyed the last few years of her life as much … and just funded her care for longer 🤷🏼‍♀️

Bewilderedandhurt · 13/04/2023 07:49

Your parents sound financially inept so I don't think this would be a particularly good investment especially with the early redemption penalties of the equity release.
You'd be better keeping control of your money and investing it with the possibility of assisting them financially if they require it.
Your parents sound like my MIL who is terrible at planning financially.

Kittensat36 · 13/04/2023 07:52

pussycatinfluffyslippers · 12/04/2023 13:05

Oh, and just one comment about the "Equity release" adverts.

If I were stupid enough to do ER, I wouldn't be wasting money on the house. The bank owns it now, so why pay for new windows, new kitchen, new bathroom etc? Spaff the lot on a holiday for you but don't waste a penny on the roof over your head that you no longer own 🤷‍♀️

Tom Selleck fronted a campaign for one of these companies in America. Someone edited the adverts and made him say "look, this is a scam. We just want your house." Very funny.
But I agree, @pupussycatinfluffyslippers (glorious name) - scorched earth is the way to go.

Weallgottachangesometime · 13/04/2023 08:01

It shocks me that this is a) legal and b) a job that people can do within their conscience!

YABU- I would never place my financial situation at risk for my parents. I’ve helped them with a rent deposit, loaned money for carpets when they couldn’t get credit etc. whenever they get money they spend it on stupid shit like expensive TVs and Dyson hoovers all the while their house is crammed to hoarder proportions. In the end they are always struggling for money again because whenever they have good times they spend themselves back into debt.

Look after your own financial situation, leave them to it. Worse that will happen is they’ll loose the house and have to be housed in social housing or care homes. But that is the consequence of their actions. Obviously if you think they were defrauded or scammed in anyway the follow that up, but aside from that stay out of it.

Sugarfree23 · 13/04/2023 08:12

L1ttledrummergirl · 12/04/2023 14:03

The same when you have a mortgage. Until you own it, why pay to add value to the banks asset.

Show quote history

When a house is mortgaged you will eventually own it. Even of the bank repossess it they will sell and you get whatever is left after the debt is paid off.
If you make improvements you'll still get something back on them. The value will be what it is at point of sale.
If you need to or want to sell you can do.

Equity release, means another company has given you a lump sum from your house, with hideous interest rates all getting 'paid' out your Equity.
Your Equity is always reducing, the final value will only ever go down.
If you take out Equity release today, it doesn't matter what the market value of the house is in 20 years time.

Ensure you understand Equity release before you enter into it.

Sworntofun · 13/04/2023 08:15

@bellabasset that's what we tried to do. Buying a ‘share’ is almost impossible. DM was considering ER for her property. She’s in her eighties, has severe arthritis and can’t manage the stairs very well to get to the only bathroom. But she wouldn’t hear of moving or listen to my concerns about ER.
We tried to buy 20% of the house to pay for alterations to make it more manageable for her but obviously needed legal representation. Result? I spent months on and off chasing conveyancers/ solicitors who promised they’d get back to me… nothing happened. But in the end one solicitor candidly advised me that it would probably never happen as there wasn’t enough money being made by them so that the work would always go to the very bottom of the pile. I think they support the ER route. We gave up. I’ve finally persuaded DM to sell …