Help! Sustainable Retirement Solution Needed

DairyQueen

p0ppa8ear wrote: »

No criticism taken. It is fair to say that she has always struggled to budget and live within her means. It is not inconceivable that a solution today doesn't stand the test of time because the underlying behavioral issue remains. I don't mean to imply that she is frivolous with her money, simply that she is often guilty of 'treating' everyone (big Xmas gifts for grandchildren etc.).

I have given some consideration to another option, which would be for her to sell her house to me. In practice though, I could only afford a small second mortgage (maybe £60k), so this suffers the same issues as a lifetime mortgage (she only actually receives a small equity release), with the added complexity on matters like inheritance (e.g. what if my wife and I were to separate and now any intent to sell in future and share some of that with my sibling is in jeopardy).

As conveyed in my original post, I'm not very well informed on the options.

I respect your desire to help mum but don't even consider buying into her house. It would be a poor investment decision. You will be borrowing to buy a (very illiquid) asset on which (presumably) you will receive zero annual return, and then be liable for CGT on any profit when it is eventually sold.

It's also likely that you mum won't see this 'loan' quite the same way if you are the mortgagor rather than a finance company. In my experience, loaning money within a family causes all kinds of tensions. Sometimes the borrower resents the lender. Sometimes the borrower reworks the 'loan' as a 'gift'. You also risk tension with any siblings.

Rescuing your mum in the short term won't resolve the over-spending problem. You will personally carry the can for enabling the problem to continue.

You have already spotted the issues in the event of a divorce, and with inheritance. What happens if you hit a tough time and paying the mortgage on mum's house is a strain for you and your spouse?

That way be large, fire-breathing dragons.

It really sounds like the only real solution is for her to take control of her budget. If the debt is beginning to worry her then this may be the perfect opportunity for you to influence her spending. Would she be open to you working through a budget with her so that she is aware of the max she can spend each month without incurring more debt? Would you be able to (say) advise her on the max. discretionary spend she can afford so she has a clear idea of when she is overspending?

Also think very seriously before you make any offer for mum to share a home with you. At age only 68 she will be a member of your household for 20+ years and you would have to consider her in every major life-decision you made (including where you live, where you work, etc.). If you were to divorce, having mum as a responsibility would be very difficult. What happens in later life if she needs care? Your home could be at risk if her share is needed to pay care home fees.

I know you wish to do your best for mum but taking on long-term risks in order to enable her to continue over-spending wouldn't be helpful to you or to her. You would be watching every penny she spent, and resenting every expensive purchase she made, if you were underwriting her debts. It's a recipe for a family rift.

It sounds like mum wants her cake, and eat it, and with cherries and cream. She doesn't want to cut spending, or move area, but she's an adult and she must face the fact that she can't afford the lifestyle she wants. The solution looks like a combination of economising and downsizing. That way she clears the current debt and stays debt-free moving forward. In a decade or so equity release would be a more viable option of releasing capital from the house but, at her age, the large, downside would outweigh the relatively small benefit.

Triumph13

DairyQueen wrote: »

Unfortunately, her desire to live at couple-pension level may not be do-able.

I don't know. Maybe OP just needs to help his mum set up her online dating profile?

DairyQueen

Triumph13 wrote: »

I don't know. Maybe OP just needs to help his mum set up her online dating profile?

Good lateral thinking:)