Mum has house but no money

Fizzer401

Hi, I hope I can get some good advice here.

My Mum lives alone and has just finished paying off her mortgage after years of slog and really hard times. Unfortunately in the mean time she has run up debt (expensive debt too! credit cards).

She finds it difficult to talk about money but has asked me if I thought Equity release would be the right thing to do. Now equity release scares me witless. I think the risk is that she will get a pot of money, which will be gone in a few years, and fairly promptly have no equity left in the house just when she needs some money to pay for good care.

I have suggested that she should downsize from 3 bed semi to a smaller place and pocket the difference, clear the cards and go on holiday (she hasn't had a holiday for years) but she really doen't want to move, she has worked too hard to get where she is and feels safe there.

My wife and I are mortgaged up to the eyeballs so can't offer to buy even part of the house and my brother is in the same boat with 4 kids (another on the way) and a mortgage too. Basically we're all living in fear of redundancy ourselves.

I have suggested going to CAB and debt cousellors but she won't go, she wants to go to see someone (probably Aviva) to give 'impartial advice' about 'which ER product' to go for.

I'm not sure what to suggest, she's fairly depressed and I'm giving her all the support I can. Has anyone got any suggestions about where to start?

Many thanks in advance.

tek-monkey

If she has just finished paying the mortgage, can't she use the money she paid the mortgage with to pay the cards off?

Swishy_bell

How about trying christians against poverty? They have the bonus that someone friendly will come to her house for a chat, especially good if she is elderly and has trouble getting about. If she can get over the hurdel of asking for help they will be able to give a bit more person support than CAB which may be useful if she is suffering with depression too.

Other than that maybe visiting the debt free wannabe board for ideas on getting the debt to a more managble level and with better interest rates etc?

GSXRCarlos

could she remortgage? interest only?

How much debt are we talking about? i'm guessing not just a couple of grand?

poppysarah

Yes unless she's given up work then she can use the income she used to pay the mortgage off ... and if she's given up work she should get a job! It helps people stay active and alert longer.

Pee

Equity Release isn't a bad idea - if it is the only option she has for making her life more comfortable. Basically, it affects any inheritance she may have to leave, but sounds like you'd rather see her comfortable now. (Well done you.)

I would suggest she considers the options above and tries to get rid of the debt without Equity release, but if that is the only option, help her to look into it, make sure it is the SHIP scheme, get someone independent and shop around like you did for your own mortgage.

margaretclare

Anyone thinking of equity release should look at the SHIP website first: https://www.ship-ltd.org

I would agree with you that downsizing should be the first thing to consider. Someone living alone scarcely needs a 3-bed property.

Try searching 'equity release' because this has been discussed exhaustively on this site.

clutton_2

i moved from a 8 roomed house to a 4 roomed place last year and i lurve it..... much cosier, warmer, less to clean, no stairs, - i dont know why i didn't do it years ago......

Jowo_2

Surely now she hasn't got the burden of a mortgage, she can divert that spare income into paying down her credit cards?

Do you think you need to convince her to tackle the root cause of her debt, change her behaviour that led to her spending more than she earned, rather than go through a cycle of debt and repayment all over again?

What is the reason behind her debt and how big are they?

Aviva is hardly going to give impartial advice, are they? Aren't they just likely to send a sales person on a commision?

PhilipTapper

the best way of paying off your debt is by renting the property out

Fire_Fox

All the regulars on the Debt-free Wannabe board advise against (a) consolidating debt and (b) turning unsecured debt into secured. By doing the latter your mum is risking losing her home if she isn't able to keep up repayments. If she went onto a DMP (see below) she would not be expected to sell her home as long as she stuck to regular payments.

Many of the DFWs are on Debt Management Plans with CCCS or Payplan (both charities) which basically means the charity writes to all the creditors and makes an offer of monthly payment according to her means. Most creditors will freeze interest, at least for a while and the debt charity will deal with any difficult letters. If your mum has more income she can either save up or make higher payments and, crucially, if her income reduces the payments can be reduced so they remain affordable.

This is the budget planner they use:
http://www.makesenseofcards.com/soacalc.html
If you feel able to, you could help mum fill it in so you can see where she might cut back, if anywhere. Often on DFW the most frightened people start feeling relieved the moment they have filled in the SoA and shared the burden with someone. If your mum is computer literate she will get so much support on DFW board - they are known as the huggies!!

In terms of bringing in more income could she take in a lodger? The income is tax-free up to approximately £4K a year. Also is she getting any benefits she might be entitled to, or is she too proud? Also is she willing to cut up all her cards? Has she sought medical help for the depression aspect?