Taking on parents' debt V equity release

Ping42

holly_hobby wrote: »

We of course have the lifetime equity release option, but that will directly erode the free equity in the property (so beneficiaries may not be too happy), unless a provider is sought whom permits payment of interest (effectively ringfencing the debt), of which there is a current provider in the market (subject to critera, and property value and max ltv given the relatively young age for any LTEQ exercise).

in place.

Hope this helps

Holly

Thanks for all this it does help. I think we need to do a bit more digging. I wasn't aware that ringfencing the debt and paying the interest on an equity release was an option. I don't like the idea of eroding the equity in case they are forced to move in later years due to the property not being suitable etc.

OH isn't worried about any inheritance (but sibling may be) and would be happy for them to spend what they've got on a happy retirement. It's the worry that equity release will eat away at the money and not leave enough to see them til the end of life.

holly_hobby

If a LTEQ arrangement is to be considered, please take note that redemption penalties can be meaty, and that depending upon the property value they LTV may not be sufficient to meet the criteria for the provider whom permits monthly payment of interest.

Anyhoo, if Mum & Dad want to explore this option (which is a niche area of advice), you need to specifically source a qualified equity release adviser (whom should be aware of the provider I'm eluding to).

Try local yellow pages, and SOLLA site (which provides details of equity release advisers whom, in addition to suitable qualifications, have also been futher voluntarily and independently assessed and audited, as to their proficiency in this area of advice.

Hope this helps

Holly x

Jimbo1976

What did they do with the £40,000? Suggesting they were mis sold just because they were given what they asked for seems to be a common argument these days. Presumably they would have told they lender how they intended to repay the loan after the 10 years?

sleepless_saver

Jimbo1976 wrote: »

What did they do with the £40,000?

This is the most important question, and the answer will affect how you proceed.

Did they need the mortgage to buy the property? Did they need it to improve the property? Or did they need it to maintain their lifestyle, or to consolidate other debts. If either of the last 2, then they were already living beyond their means and whatever you do now will only be a short term fix to long term problems which will happen again - especially as their income is now less.

I don't envy your job in going through their options with them. If they are living in a house they can't afford then they should move now, rather than being forced out later.

Ping42

They bought a new house. I'm not really thinking they have been miss sold.

Looking into the possibility of maybe remortgaging our home and then paying off their Mortgage and putting a charge on their house with interest to be added to pay our extra mortgage but not rolling up like an equity release. Thinking this might be the cheapest option and understand this way you don't have to pay CGT on the sale of their house.?

holly_hobby

Yes as suggested in my original post, I think a rmg and secured charge on Mums home would be the way forward (given the issues discussed).

To which the property would no doubt have to be sold by the administrators of the estate in order to redeem your charge (to which there is no CGT on disposal), as this is a debt of the decds estate. And as such will be settled (as will all other os debts) before the residual estate can be administrered under the terms of any will (or intestacy laws if there is no valid will in place at the time of death).

Hope this helps

Holly

Ping42

Thank you very much holly hobby for your thoughts and suggestions on this.

I do think this might be the best way forward as although we still think them moving now is by far the best option, they aren't going to do that and this seems the cheapest option. The main benefit I see is that if they have to move in later life at least they will still have enough equity to buy something and if really necessary we could let them use some of the outstanding debt to buy something suitable and wait for the money until after they have both gone.

I just need to get my head around the fact that in the long term it makes sense but accept that it means us extending our mortgage and paying out more every month:(. I think we need to make sure we can do this without resenting doing it.

holly_hobby

Well yes, and of course there is less free equity for you to release if you wanted to do this for your own benefit at a later time.

Maybe you could come to a private arrangement with them regarding the monthly repayments ?

If they didn't/couldn't pay at a future time, would you still be able to manage your own household costs ?

Unfortunately we sometimes have to make decisions that we don't want to face, and downsizing is a very common issue for post retirement individuals, even those whom were responsible and made provision for future repayment, but sadly whose repayment plans failed to perform as anticipated.

Without sounding harsh, your family must take priority here - and whilst is noble to want to help your parents-in-law - you must remain balanced and objective (if at all possible !) as to the increased finanical responsibility you will be exposed to.

A long hard chat between all parties is required here .... and I wish you all well x

Hope this helps

Holly x