Mortgage for elderly mother

Gabydolores

Hoping someone can advise here. My mum and my older sister share a home which my dad took out an equity release on a few years ago before he died. At one point we were thinking mum would downsize and pay off the equity release, but she can't bring herself now to leave the family home. In the mean time the equity release has gone from 55K to 100K.

My older sister, who is nearly 50 and has no property of her own lives with my mum and cares for her. I'm very anxious about her being left without a home when my mum dies. Both my mum and sister are looking for ways to pay off the equity release and one idea they've come up with is to get a mortgage to pay it off, with my sister acting as guarantor. My sister has a secure full-time teaching job and earns enough to cover the repayments on a 100K mortgage. The house is worth about 500K so there is a decent amount of equity in it, at least at the moment. Mum is 76 and her pension is about 12K a year..

I'm wondering if there is such a thing as a mortgage for someone of this age? The alternative would be to transfer the house into my sister's name and then my sister could get a mortgage herself, but that would incur stamp duty costs and pose difficulties with the equity release.

Any thoughts?

Thanks (in advance!)

TonyMMM

Your mum isn't going to get a mortgage for 100k on that income (or at that age) - If you mum can't be persuaded to sell, I would look at your sister taking a mortgage to buy a share in the property (paying off the equity release with the proceeds).

You need to take professional advice on this ... particularly around the implications should your mother require care in the future, and any inheritance tax issues.

RenovationMan

As Tony has already advised, I'd look into your sister buying a share in the house - perhaps the share that the equity release people currently own.

If your sister is a part owner in the house I don't think that they could force it to be sold to pay for residential care, but best to check this. I did find some info here:

http://www.nidirect.gov.uk/your-home-your-assets-and-your-care-home-fees

What happens if you're a home owner


"If you own your home, it may be counted as capital 12 weeks after you move into a residential care or nursing home on a permanent basis. However, your home won't be counted as capital if any of the following people still live there:

• your husband, wife, partner or civil partner
• a close relative who is 60 or over, or incapacitated
• a close relative under the age of 16 who you're legally liable to support
• your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent

Your local Trust may choose not to count your home as capital in other circumstances - for example, if your carer lives there"

Gabydolores

Thank you for your responses. I can see that my mum will need detailed legal advice.

Honestly, I could curse the equity release company that persuaded my parents that taking out this policy on their property was a good idea. My mum really didn't understand the implications of what she was putting her name to. She only now (just) understand what compound interest is and how it works. Nobody discussed whether she could afford to stay in the property if she was widowed. If my sister hadn't moved in with her she'd end up in a terrible situation - too poor to stay in the house (it has a big garden which she can't afford to keep up on her own and is expensive to heat and maintain), but eventually without the equity to move to another property in the very expensive village in which she's lived for the last 30 years.

holly_hobby

Hi,

Firstly sorry for the situaion your Mum is in - lets look at the facts.

Lifetime mges are not designed to be redeemed early - due to the heavy redemption penalties - they are really only suitable for a final home arrangement (designed to be repaid on 2nd death or entry in to longterm care).

In the current situation, the accrued interest is eroding the free equity in the property - depending upon when redemption under the above circs happen - it may be largely or completely eroded by the time either of the above events occur.

Your sister will not be able to become party to the equity release mge due to her age - and the estate may have to sell the property on the open market on Mums passing, to redeem the accrued debt at that time under the equity release mge (unless Sister will be able to raise a mge to repay the os eq release mge, and effectively take ownership of the property at that point).

Current situation is that Mum owns the property - but is too old to obtain an alternative residential mge to repay the equity release arrangement.

Sister lives with Mum, but is not on the deeds, and wants to take a mge out on the property to repay the equity release arrangement, and take a share in the equity of the property to secure her position.

Thiw would effectively mean that Sister becomes named on the deeds, along with Mum as joint tenants (equal share) or tenants in common (under which unequal shares can be held, and each share individually bequeated to a 3rd pty).

The problem is, mge lenders require all those named on the deeds to be party to the mge - and Mum's age is really too old for any decent term - so you're back to square one.

So, the only way to do this, would be Sister effectively wholly purchasing the property from Mum, to have Mums name removed from the deeds.

Looking at the value of the property, this may raise IHT issues (under gift with reservation if sold at a discounted price and market rent not paid), stamp duty, deprevation of assets (if Mum applies for state funded long term care).

Further more, you have the issue of sister owing 100% of the property, which will be unaffected on Mums passing - further more Mums security of residence may be effected as Sister is the property owner, and can, in theory do what she wants with it. Further to which if Sister does not maintain the mge, your Mum (having signed a consent to vacate as part of the application process, which is reqd for all residents over the age of 17 not party to the mge), Mum will be subject to the eviction notice as well as your Sister - resulting in her home and security being lost.

Lots to mull over .... have a chat with your FA re estate / IHT planning, and if there may be legal agreement effected re division of the property on Mums death (effectivlely sister would have to buy you out, or sell the property to release your share - something along those lines).

Its achieveable, but as you can see, there will have to be a lot of trust involved, IHT provison put in place to protect any gift with reservation issues that arise as part of the "sale", and possible funding of any long term care arrangement that Mum may have to enter into

Hope this helps .... I wish you all well

Holly