Buying a retirement property

TB26

Hi everyone. I have just run into a bit of a brick wall, and any advice would be really welcome. I have a bit of a tendency to waffle - hopefully I explain clearly!!

My grown-up child and I live with my mother, and have done for over 20 years, in the house I grew up in. Times have been hard, but I guess my mother is now equity rich/cash pitifully poor. The house is probably worth about £750k, and there is no mortgage. She has no pension from her old job, and only receives the state pension. She would now like to move into a retirement property, and we have found what seems ideal, at a cost of about £290k. Because she will be downsizing considerable, and my son and I will also have to organise somewhere else to live, it makes sense to buy the retirement property first, move in slowly, then sell the house. I earn a reasonable salary and have few outgoings, so approached my bank to see if they could help; ideally, I thought they could give me a mortgage for the amount needed (I have previously had a mortgage certificate for more than the £290, so the amount is no the problem). I could then buy the retirement property, which she could move into slowly. The house could be sold hopefully within the year. Then, money from the house could help fund buying a property for my son and I, and/or paying of the mortgage early. I expected that the earliest we could repay the mortgage would be about 5 years, and this would not have been a problem. Unfortunately, my bank said a flat, outright no. Their problem is not that I am buying it for her, as she would be considered a dependent. Their problem is that they will not lend on a property with restrictions - because this property is for over-60s, they won't lend on it. Silly really, as these are selling like hot cakes! They are in a prime location and 6 have sold in the last four months. The bank say that, had it not been for over-60s rule, I could have the mortgage, no problem.

Does anyone have any advice on what they think the best strategy would be? Like I say, we work hard but don't have any savings - it's all tied up in the house. Equity release may be a good idea, but we are worried about the scare stories, and if a vast amount of the capital from the house became eroded, I would be in more problems, because I couldn't then afford to buy somewhere for my son and I.

Many thanks for reading through my lengthy post. Would love any straightforward advice.

Thrugelmir

TB26 wrote: »

Silly really, as these are selling like hot cakes!

Though far harder to sell on in the future as many people have found out. Lots of retirement properties now struggle to find buyers.

As the property can be sold to another person(s) who meet the age requirements.

holly_hobby

Well there are obvious IHT issues here for a start off - so estate planning with a Financial/Wealth advisor is reqd.

I would also ask Mum to consider effecting a Lasting Power of Attorney (LPA) in your benefit (and/or other siblings/close relatives). There are 2 LPAs which can be both or singuarly effected - essentially one for financial matters and one for health - and I would highly recommend considering (hopefully they will never need to be implemented, but you have them if needed).

Thurls is correct - the issue in mortgaging a property with restrictions - is that in the event of possession, they have a limited market to dispose of the unit, which may well effect the price achieved and time taken to dispose of it.

So, it would appear that equity from Mums property needs to be utilised. There are a number of ways this could be achieved - all with the positives and drawbacks !

Equity release under your Mums name is an obvious solution - but it is obviously an arrangement intended to be held for a relatively short period - so traditional age related lifetime mge schemes may well be out, due to the redemption penalties laid down, with as you have already touched on, the possibility of free equity being significantly eroded due to the duration, interest rate, and manner the arrngement is held.

There is one provider whom I am aware of that offers a lifetime mge in the traditional sense, but also allows the option to repay either wholly or partly the generated mge interest each month - thereby ringfencing the original debt. The provider is also a member of SHIP (safe home income plan - whom operate a voluntary code of conduct), and have a no - negative equity gte. The interest rate isn't fantastic at a little over 6%, and I don't have the redeption figs to hand - but horses for courses I guess, and may be a solution.

Speak to a whole of market equity release/financial adviser - whom will not only be authorised to arrange any lifetime mge arrangement - but should also be able to guide Mum on will and estate/IHT planning.

The other way would be for you to effectively pch the property from Mum for the amount as discussed earlier - whereby she uses the capital to pch her new retirement home, (obvious issues if you have siblings, if you are to retain the prop or sell on, if Mum wants others to benefit from the property on her passing, stamp duty,long term care, IHT/PET issues and other considerations re estate management ).

In any of the above solutions - the assistance of a Independent Financial/Wealth Adviser is reqd (try & get one that also advises on mges too, to save time and effort in using multiple professionals for each issue to be addressed).

Hope this helps

Holly

getmore4less

Sell and buy mum a place.

Rent while you sort out the finances for yourself.

TB26

Many thanks for such quick and detailed replies. I did perhaps not make it clear that these are not new retirement properties - they are nearly 20 years old. The reason they sell so quickly (there is a waiting list) is because they are in a central London location. That is why these particular ones have no problem reselling. Wish I could buy one myself!

I think I will try and seek further mortgage/equity release advice before selling first - although this makes the best sense, it will be a total headache, and I'm not sure I could face it!

Thanks again. Without question, the people on this forum are always so helpful.

franklally

My parent's in law lived in a retirement property for their last eight years - their situation sounds similar to your mothers - they had a fantastic quality of life throughout in their McCarthy and Stone apartment and were safer, happier and more secure, yet independent, more so than if they had lived on their own in a bungalow.

It did take over a year to sell the property - but I would not hesitate in recommending living in a retirement property for your latter years.

getmore4less

TB26 wrote: »

Many thanks for such quick and detailed replies. I did perhaps not make it clear that these are not new retirement properties - they are nearly 20 years old. The reason they sell so quickly (there is a waiting list) is because they are in a central London location. That is why these particular ones have no problem reselling. Wish I could buy one myself!

I think I will try and seek further mortgage/equity release advice before selling first - although this makes the best sense, it will be a total headache, and I'm not sure I could face it!

Thanks again. Without question, the people on this forum are always so helpful.

If you can't keep the place then it seems a bit crazy to create debt that will need servicing and have a house that is not appropriate for your needs and will need looking after.

Mojisola

TB26 wrote: »

She has no pension from her old job, and only receives the state pension.

Is she claiming any benefits she's entitled to - Pension Credit for starters?