Equity release

jmaow

Hi, I'm after some advice. MY parents took £50k on an equity release scheme about two years ago and bought themselves a caravan which they enjoy using and have spent a lot of time there. Unfortunately my dad has been diagnosed with leukaemia and has 18 months left. My parents house is a 4 bedroom house and my son and I have been living there while I save for a mortgage deposit. My mum has said she won't be able to afford to run the house when my dad has gone and my parents are keen for me to pay off the £50k and when my mum has gone the remaining money to be divided amongst myself and sisters. Would this be possible to do? I think the house is valued at approx £150k. I want to look after my mum but I'm worried I won't be able to afford it all.

Keezing

Do you have the 50k?

Nebulous2

It's a big decision. You've left a lot of stuff out though.

What would it cost to pay it off? Likely to be much more than £50k.

Would you go on the deeds? Otherwise how would anyone know you had a stake in the house?

What do you earn? Can you afford to give your parents maybe £70k and buy for yourself? Or would you stay there long-term?

Best option for Mum if she can't afford the house is to downsize, but that can be difficult, financially and emotionally.

jmaow

Thanks for your replies, I think to repay the equity would probably be nearer to £60k and I would need to get a loan or mortgage, my parents said we would have to get a solicitor to have my name added to the deeds, the original plan my parents had was when they had both gone the house would have to be emptied, probably by me, the equity company would take back the money owing to them and whatever is left shared between myself and two sisters. My dad said I would have to pay back the loan quickly so I can then get another loan to pay my sisters. I'm worried how I can afford all this, after deductions my monthly earnings are £1,400 a month, so I'd be paying off a loan and money to keep the house going, my mum hinted about £400. My plan was always for me and my son to have our own place, I don't know how my mum could downsize as things are.

Nebulous2

The loan alone could cost more than £400 depending on the timescale. You also don't know how long you have to pay off the loan. My grandparents were born within 6 months of each other. My grandfather died at 72 and my grandmother lived until 98. A further 26 years.

You might have great difficulty getting such a loan for shared ownership - you need to talk to a broker and find out what is possible.

Either way you're going from a situation where your parents were helping you to save a deposit to one where you are going to spend all of your foreseeable future paying off their retirement loan and trying to give an inheritance to your sisters. That is a huge demand on you - which could involve caring for your mother for 20 years. There could be a house at the end of it though.

Unfortunately I cannot see that you can afford it.

jmaow

Thanks, looking at the calculations you're right, if I took out a £60k loan and paid it back over 12 years it would cost approx £500 per month plus I have been paying £200 a month and shopping etc to my parents and my son pays £150 so I can save up (ex partner took everything) so when it's just my mum I'd have to pay at least £400 a month to her as well to keep everything going, so would be £900 a month, then the stress of inheritance for my sisters.

Keep_pedalling

Equity release schemes are not designed to be payed off early so it is very likely that doing so will come with some pretty stiff penalty charges.

Even without that I would not take the route your parents want you to, yes it will reduce your inheritance, but you will be able to save for yourself and won't be trapped in a set up that could last for decades.

csgohan4

don't get yourself in trouble because of your parents. Unless you don't expect the money back


Money and family shouldn't mix.


They were adults when they took the equity out and they have to decide how to get it paid off without getting you into difficulty.

jmaow

Thanks everyone, think my dad has been selling it to me as helping me out as I would get a cheap house, which I didn't see how it would be the case. I'm 44 and like you said I'd be tied into it for a long time, plus because one sister lives a long way away and the other has spoken to them for 2 years know that I'd be left to sort everything. IVe been looking forward to getting my own place too and having friends around or be able to have a holiday in at some point which I've not had for years.