Releasing equity in my parents house

SimonWool

1st time user, so please be gentle...
My parents (86&81) are healthy (unfortunately!) and look be to good for at least another 10-15 years. They are looking at a Prudential Lifetime mortgage (6.9%), so borrowing £150k will have built up a debt of ££281k after 10yrs and £385k after 15yrs. Would it make sense for them to transfer the house to either my sister or me, and then we take out an interest only mortgage on it, using some of the mortgage to repay the monthly repayments, giving the rest to my parents?
Any thoughts??

boinging_2

Why is it unfortunate that your parents are healthy?

happybroker

the "problem" with keeping some of the mortgage back to pay for the payments is will your parents out survive the finds you keep back? problem not really the right word but you catch my drift.

the other consideration is would you qualify for the mortgage yourself? obviously lenders will take into account your own commitments and financial status when considering your application and keeping some of the money back won't satisfy them I'm afraid.

i think all of you seeing a good IFA would be a good idea

bryanb

SimonWool wrote: »

1st time user, so please be gentle...
My parents (86&81) are healthy (unfortunately!) and look be to good for at least another 10-15 years. They are looking at a Prudential Lifetime mortgage (6.9%), so borrowing £150k will have built up a debt of ££281k after 10yrs and £385k after 15yrs. Would it make sense for them to transfer the house to either my sister or me, and then we take out an interest only mortgage on it, using some of the mortgage to repay the monthly repayments, giving the rest to my parents?
Any thoughts??

Have I got this wrong, or are you suggesting that, your parents pay your mortgage using the equity from their house? I don't understand what you would be giving them either, seems to me it would be their own money.

happybroker

bryanb wrote: »

Have I got this wrong, or are you suggesting that, your parents pay your mortgage using the equity from their house? I don't understand what you would be giving them either, seems to me it would be their own money.

yep, I think you have this wrong. OP is wondering if a straight forward mortgage on the parents' house (after gifting them the house) would work out cheaper than an equity release.

for me the big issue could be IHT and/ or CGT so they really need to speak to an IFA

EdInvestor

If they take out the equity release on a "drawdown" basis, only taking out money as and when they need it, the debt will roll up much more slowly.

lisyloo

Would it make sense for them to transfer the house to either my sister or me

This is a minefield from the point of view of Long term care so you need to be careful.

Some people try to put houses into the names of offspring to avoid paying for long term care.
I'm not saying you are trying to do this but the result will be that the local authority will probably look at the transaction in detail if you parents want state funded long term care.

They can "roll back" the transaction i.e. take the hosue back to pay for the care.
But of course the mortgage (in your names) still needs to be paid.

Tread carefully.

Also what happens if one of the people paying the mortgage dies, get sick long term, has an accident etc.
If the mortgage cannot be paid then the parents potentially lose their home, so you have to cater for all these scenarios.

I know you would think the parents would die first, but it's possible it's the other way round or one of the mortgae payers get long term sick or has a bad accident and can never work again.

I think you need to look at all these types of pitfalls before proceeding.

margaretclare

I am appalled at the bald statement that 'parents are healthy - unfortunately!'

In other words, the OP would prefer it if parents were unhealthy and would hurry up and die and leave him his 'inheritance'.

It is entirely the parents' business what they do, whether they choose to take on a 'lifetime mortgage' - presumably they need the £150K they are planning to raise by this means? If they need it, and understand all the implications, then it's entirely up to them. An inheritance does not exist until someone dies, in this case the second survivor of the couple.

We did a 'lifetime mortgage' in 2003 just to pay off the existing mortgage, borrowed 25% of the value. It was worth it to us not to have an ongoing mortgage payment which would have continued until we're 83. But that was nowhere near the amount mentioned here. Why do the parents need £150K at this stage in their lives?

bryanb

happybroker wrote: »

yep, I think you have this wrong. OP is wondering if a straight forward mortgage on the parents' house (after gifting them the house) would work out cheaper than an equity release.

I'v re-read the last sentence of the OP, I still can't see what financial input would come from the OP. Could you explain?

candygirl

boinging wrote: »

Why is it unfortunate that your parents are healthy?[/quote]
Exactly, and to the OP:
Would you prefer one of them to have terminal cancer lke my Dad does ?What a stupid, extremely insensitive comment to make, and I hope they remain healthy for a lot longer:rolleyes:

margaretclare

Candygirl, I am sorry about your Dad.

Modern demographics say that someone who reaches the age of the OP's parents in good health has, barring unforeseen events and unfortunate accidents, a likelihood of reaching their century or more. One wonders just why they need this £150K - a lot of money.

I can't believe some people.