Equity release

[Beanbob]

The initial message was deleted from this topic on 27 August 2017 at 10:40

[davepoth]

If you can afford it, you could do very well out of investing in their house. Certainly once your parents have shuffled off this mortal coil the equity release company will get a lot more of the property than you would otherwise.

-edit-

even if you aren't worried about the inheritance, I have an aversion to wasting money, which is what equity release looks like in this situation to me.

Definitely get lots of advice from proper people though, as you are quite right to be wary. I can see that this could go extremely badly wrong! Get it written down properly too so everyone (especially any siblings) knows where everyone stands.

I'd be concerned about

-Inheritance Tax
-Care Home funding
-Wills and inheritance


in particular.

[drainbrain]

100% agree. If it's comfortable for you and sibling then you two carry the mortgage. If it's not then get the right specialist advice. Even sourcing that can be tricky in a slippery age. Ads for the advice service in Saga probably aren't a bad place to start. It's a pretty credible mag for us oldies. But I'd definitely do it yourselves if it was me.

[Sarnie]

davepoth said:

Definitely get lots of advice from proper people though, as you are quite right to be wary.

Indeed........lots of sharks in these waters.....

[sidicks]

Sarnie said:

davepoth said:

Definitely get lots of advice from proper people though, as you are quite right to be wary.

Indeed........lots of sharks in these waters.....

Plenty of reputable firms around, but interest rates are high, due to the risks and costs involved

Likely to be much more sensible for you to invest in their house, if you can afford it.

[Ozzie Osmond]

"Equity release" sounds lovely but means exactly the same as "dramatically increasing your debt" - which doesn't sound quite so warm and cuddly. Because it's not.

IMO it should generally only be considered if there are no realistic alternatives. Many of the effective interest rates are outrageously high.

It's kind of like buying an annuity where you're asking a company to make a bet on your life expectancy. And like any other casino, the company fixes the odds to give themselves the certainty of coming out on top, with a handsome profit as well.

[Ozzie Osmond]

If it's affordable for you I'd look at something concrete like, say, buying 25% of the house off them at current market value. As and when that cash runs out you could go through the same loop again.

They'll need a solicitor on board to deal with the transaction and to make sure the arrangement is sound - for instance the valuation will need to stand up to possible future scrutiny by HMRC. There's also the question of whether they should be paying you 25% of market rent for occupying your 25% of the house.

Final point. If you have brothers and sisters, try to make sure you're not setting the scene for lots of future family squabbling.

[Phooey]

Sell up and buy a house for cash / no mortgage

[mjb1]

Might sound a bit harsh, and without knowing the exact situation with sibling, she ought to be stepping up a bit. Maybe the two of you could go halves to clear the mortgage - you put down 50k cash, she gets a mortgage for her 50k. Even on minimum wage she should be able to get a mortgage for that I think, maybe even more. Your 50k equity gives you an 11% stake in a 450k value house. That could be worked with (expenses for repairs/maintenance etc).

[NickCQ]

If you aren't worried about the size of your eventual inheritance, why are you worried about intentional deprivation?

[Sarnie]

Beanbob said:

but if I am buying all or part of their house which is the significant part of their estate, she would not receive much and I would and it would be perceived that I do not need it.

I don't get this bit.........your "inheritance" would only be a repayment of your cash that you'd paid to buy the property/pay off the mortgage? Your sibling will only be worse off if your parents take the equity release route.....as it stands your sibling isn't looking likely to be receiving any kind of significant inheritance anyway, based on the options available ....

[Mgd_uk]

If you are wanting to buy 20% of the house ensure you are using your old room as storage thus using a portion of the house that you purchased from your patents, you then don't need to charge them any rent for this portion of your ownership.

[Rangeroverover]

As I understand it providing the parent survives 7 years the intentional deprivation won't apply.

If it were me, provided you explained everything to your sister and she agrees I would mirror whatever offer the equity release Co offer.........or if you "buy" 25% of the house for £100,000 just do it as its a nice thing to do, when the inevitable happens you get 25% of the value plus 50% of the remaining value split with your sister.

I don't suppose the parents would expect you to pay 25% of the maintenance, insurance etc so you get some benefit from it and it will be far cheaper than paying their £1250 pcm mortgage payments

[Ozzie Osmond]

Rangeroverover said:

As I understand it providing the parent survives 7 years the intentional deprivation won't apply.

It seems there's no direct connection with the 7 year IHT rule, although the more time that passes the better.

[anonymous-user]

Mgd_uk said:

If you are wanting to buy 20% of the house ensure you are using your old room as storage thus using a portion of the house that you purchased from your patents, you then don't need to charge them any rent for this portion of your ownership.

This is a good point. If there is £100k mortage, you can then clear this part without complicating arrangements further.

Op - I would agree you need to be careful - I've seen this type of situation blow up in a spectacular way when family/inheritance/money get mixed up.

Sometimes even the closest family members can get suspicious/jealous/unreasonable even though you have the best of intentions.