Trying to help parents out but dont know whats best?!

Hi,
My parents are considoring releasing equity from their home (to pay off debt, do some housey jobs-windows etc..and get a little holiday out of it too). From what I understand they could get the max amount of 23k...which would increase to a huge 92k (approx) owed in say 20years time......which sounds horrendous to me...but then as my dad said, the house isnt any good to them when they've died so why not enjoy the money now?

-my concern is though that 23k isnt going to last forever and this is just a quick fix.. -has anybody had any good/bad experiences of equity release?

Another option for them could be to buy a cheaper house although after looking at whats available in the area, they'd probably only end up around 20k better off......but atleast the house wouldnt be essentially 'sold' to a company for 23k....

A third option which my mum suggested was to sell the house to me me for below market value although we have no idea what the implications of this would be. The house is worth approx 100k and they'd sell it to me for 'whatever you can get a mortgage for'. I just dont know if this is the right decision for them although anything to avoid a dodgy equity release company is favourable I think..

I already have a small mortgage which im only 18months into (owe around 66k) -is it likely id be given a second mortgage?.. Perhaps me buying it to let would be a better option?


Anybodys advice is appreciated...

Thanks!

:D
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Replies

  • Savvy_SueSavvy_Sue Forumite
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    ooooo, the words 'can' and 'worms' spring to mind. :rotfl:

    Seriously, I'd say your parents need to get good advice, possibly the kind you pay for, because that's the only kind you can rely on. You haven't given us enough information, and a proper advisor would ask all the right questions - how old are they, what income do they have, what state of health are they in, and so on.

    And you need to get good advice too: whether you could get a second mortgage would depend on your income, your age etc. But going into the buy to let market isn't something to undertake lightly: there are all sorts of legal obligations on you and it's not the money maker many people think it will be.

    If you buy it and your parents continue to live in it, there are all sorts of OTHER implications: Capital Gains Tax, Inheritance Tax, Deliberate Deprivation of Assets if they ever need residential care. Quite a lot's covered in this thread, don't be put off by the strength of feeling, because you haven't mentioned doing this so that your parents get free care should they ever need it, it's just that that's a reason often given for doing this.
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  • firesidemaidfiresidemaid Forumite
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    another option would be to sell for the best price and rent.

    as poster above has said, much more info would be required to comment.

    also, would it be better to look at your parents incomings and outgoings - are they savvy generally, getting the best deals for everything etc.

    i ask this because they are 23k in debt and, perhaps, not managing their money as well as they might?
  • Savvy_SueSavvy_Sue Forumite
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    i ask this because they are 23k in debt and, perhaps, not managing their money as well as they might?
    your points are all valid, however I didn't read it that the OP's parents were 23K in debt, but that that was the most they could release from the equity in the house.
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  • Thanks for your replies. I've had a little read up on it and can see its not very straight forward...

    To try and answer your questions -my parents are 60 and 65 and both not working. Dad retired on ill health grounds a few years ago and will be getting his pension next month and mum got made redundant around the same time..not sure what income shes replying on -I know they get pension credits and the likes, but nothing like DLA or anything like that.

    I dont think theyre in a horrendous amount of debt, maybe about 6k in total but with such a low income repayments are proving difficult. (Could partly be down to poor money management, im not sure to be honest).

    Anyways, I know they're not keen on selling up and moving house as this can be stressful and this is the last thing my dad needs really..although the stress of money troubles isn't helping either I suppose..

    Ive got them an appointment with an IFA who is coming out to see them tomorrow for a free initial 'chat' -not sure how that will go but we'll see. And im trying to get in touch with the broker who sorted my mortgage out for me to see if he can help....

    Do you think the CAB would be helpful in this situation or are they usually just about consolidating debts?

    Thanks again :)
  • When I say poor money management....they have the cheapest gas and electricity deals, no sky tv, payandgo mobiles (which I pay for..), shop around aldi, lidl etc...for the cheapest foods, dont really go out or do anything that costs money apart from maybe the cinema once a month... The house is paid for and so is their car so they're not massive drains on their money... I think its just credit cards/overdrafts that they cant keep up with.
  • margaretclaremargaretclare Forumite
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    We did equity release in 2003. We did it because, following my younger daughter's death, we could see no point in going on paying a mortgage to be paid off when we were 83. We released £45K, enough to pay off the mortgage and free up the £260 or so a month that was going on mortgage payments.

    To release 25% of the then value one of us had to be 68 or over. So your parents may possibly not be old enough yet.

    The interest has not rolled-up in the frightening manner you hear about, mainly because the Bank Rate has been so low for so long. If the interest had been 'pegged' to that which applied in 2003 it might have been different, but instead, it was pegged to the Bank Rate as it applies.

    The first port of call for anyone considering equity release should be the SHIP website: https://www.ship/ltd.org (SHIP = safe home equity plans). And it should always be done for a serious reason. I don't think I would consider doing it just to pay off credit cards.
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • firesidemaidfiresidemaid Forumite
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    hello.

    i have also tried to help my parents, who are similar ages, and i know it can be difficult for both sides sometimes. priorities to you and me may be different to theirs.

    can you have a sit down with them to work out exactly how much income they are currently getting, and also perhaps check that they are getting eveerything they should re. disability benefits, council tax benefit etc.

    i also did an SOA as such with mine, just to see how much the essentials cost and what was left.

    it sounds like it might be worth having a look at the terms and rates of the overdraft and credit card, as it may be the rates or charges on those that might not be helping - maybe these could be addressed.

    hope you are able to all sort it out, whatever they decide to do:) x
  • Thanks Margaretclare and firesidemaid. I think the next step is too try and find out exactly what they owe and what the rates on each debt are.... Its just a bit awkward when suddenly im the one helping my parents sort themselves out when its been the other way around for so long! I dont want to offend them....but can see they need help and really dont think equity release is the answer just yet...

    Looking forward to an awkward chat with my mum later now...

    Thanks again :)
  • If money worries such as loans/credit cards are the problem here, I'd be inclined (if practical) to take on one or both of the debts myself and pay it off for them.

    My late mum was on a very restricted income several years ago and the only way she could afford bits and bobs after moving into a council flat was by purchasing via a catalogue.

    She was going without food and heating I discovered - just to pay off a few hundred quid that she owed.

    Anyway, I took on the debt, paid it off over a year or so and did a big shop stocking up the cupboards so that she had enough food for a couple of weeks as a sort of 'emergency fund'.

    It gave her a breathing space for a little while so that she could take back control of her finances - and she did, bless her.

    Just a thought.
  • Newly_retiredNewly_retired Forumite
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    A friend of mine sold her property and now rents. She used the money to pay off debts, her own and her daughter's I think. She can now afford a decent standard of living, some holidays, and has no worries about household maintenance. Good decision for her.

    It might be the answer for your parents. It all depends on their income, outgoings, debts and priorities.
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