Equity release - too soon?

d4nfox

My mother who is 56, is in financial hardship. She is unable to find work, and her partner is now unable to work as a trucker due to ill health.

She owns her house (circa £190k value), and her partner has always paid the bills. In the last 6 months I've had to 'loan' them two lots of £1k so that they can catch up with council tax, utilities, credit cards etc. I say 'loan' as I have written off this money and have no expectation of seeing any of it back.

It's evident that their expenditure is exceeding income and this problem shows no sign of resolving itself, despite my efforts to educate her in the art of being frugal!

She's been looking at equity release but I have concerns. It looks like the cost is high and to start equity release at such an early age when she is already living beyond her means, seems like a bad plan. I foresee her needing to release more equity every couple of years before she no longer owns her house and has no way to support herself in later years.

Are there any financial products that could allow me to buy the equity in the house, but drip feed her with monthly payments rather than a lump sum? I currently save £500/month which I usually review how to spend when it comes to switching mortgages - my thinking was that I could affford to put this money in my mum's house for as long as she's still around. I'd see no return on this in the short term, but I'd at least her house would end up with me, rather than the bank (yes - I'm aware how selfish this sounds).

Any other suggestions?

Jenniefour

Is your mother a poor money manager? If so, would your mother be willing to post on the Debt board and get some advice on budgeting? I ask that because it's not clear to me whether she's someone who habitually manages money poorly, or whether it's taking time for them to adjust to a much lower income which is sufficient to live on. If the latter then I assume you've had that conversation with your mother as well.

I would say too soon for equity release, if it can be avoided. Depends on whether your mother is normally good with budgeting and could make it last a long time.

I wouldn't go for getting a mortgage on a share of your mothers property (or anything else which legally entangles your finances with her/her property) as it might put the stoppers on something that is very important to you in future. Or, if you're married/get married and get divorced your share of her property will be included in the divvying up and her house might have to be sold.

Are they getting all the benefits they might be entitled to? That might be well worth checking. Or could they downsize? Mother needs to keep looking for work.

Addition: what they need to figure over the longer term is how they manage until state pensions kick in, which is a very long time away for them. But I imagine that's your concern as well.

sheff6107

Yes, their situation is exactly why we all pay national insurance. She's in a situation where the state should be helping.

What benefits are they getting?

Gambler101

sheff6107 wrote: »

Yes, their situation is exactly why we all pay national insurance. She's in a situation where the state should be helping.

What benefits are they getting?

Really lol :rotfl::rotfl:

Malthusian

Far too early for equity release. At her age she will not be able to borrow more than about a quarter of the value, in exchange for which the insurer is very likely to get the whole house on her death, due to the interest rolling up every year. Although you haven't given us the figures I doubt that 50-odd grand would plug the income shortfall for the duration of their lifetimes.

I would echo Jenniefour's advice. If they are both too ill to work then making sure they get all the benefits they are entitled to and cutting their cloth is the most practical course of action.

In theory there is nothing to stop them selling you part of the house in exchange for an agreed monthly amount, but it is full of potential complications, like what happens if you predecease them and your share of the house becomes part of your estate. It is likely to create more problems than it solves, and both of you would need to talk to a solicitor.

sheff6107

Gambler101 wrote: »

Really lol :rotfl::rotfl:

http://lmgtfy.com/?q=Daily+Mail+benefits

[Deleted User]

Ah the daily fail pmsl

fatbelly

d4nfox wrote: »

My mother who is 56, is in financial hardship. She is unable to find work, and her partner is now unable to work as a trucker due to ill health.

She owns her house (circa £190k value)

So she should be getting JSA and council tax support for starters

Possibility of ESA for him, which I think would become a joint ESA claim, rather than her JSA.

If his condition has been for 3 months and expected to last at least a further 6 then he should look into PIP, and she may then get carers allowance.

However, none of this is easy and none of it is generous. She really needs to come on here as she is going to have to live to a (tight) budget.

enthusiasticsaver

I cannot think of any way that this could be arranged where your mum gives you a share of her house in exchange for you giving her money every month. You cannot buy part of a house monthly like that as far as I am aware. How would you set the parameters? Supposing the housing market suddenly dipped or your mum or partner needed care meaning the house had to be sold? Suppose you lost your job and could no longer afford to pay the £500 per month or whatever. It sounds riddled with potholes.

If your mum is struggling financially now it will be worse in retirement as I am guessing she does not have a huge occupational pension in the background somewhere and she is 10 years off state pension age. Doing equity release is expensive and there have been many people who have lost their home due to this. I would not advise it. They need to budget and make sure they are getting all the benefits they are entitled to. You dripfeeding them money will affect their benefit entitlement so you should stop this. They need to manage their money better.