My Masterplan......tell me the flaws!

pulliptears

A little background first. OH and I are mid 30's and have lived in our home for 11 years. we paid £36k for it and its now valued at £120k. We have paid 11 years of a repayment mortgage.

We recently decided it was time to move to a bigger home, we have 2 kids 10 and 14, 2 small dogs and OH works from home a lot so a fourth bedroom is required now.

Now, our thoughts are if we sell our home cheaply for a quick sale we will still be very much in profit. We are then considering taking out an interest only mortgage for around £200k. We reckon that in 25 years time its highly unlikely either child will be at home, at which point we sell the big house and retire somewhere small and more suitable, thus paying off a large chunk, if not all of the remaining mortgage.

the other consideration is that (and I dont want to appear morbid here!), my parents are old, Dad is very ill now as well. With all the hopes and prayers in the world Im not going to have them around in 25 years time. Despite my pleas that they sell their home and move somewhere small now and free up some money they wont do it. So, I will have the value of that home as well to pay the mortgage.

It all sounds a little too easy though. Can you see any pitfalls in this theory?

jonewer

Arent you assuming that you will have some equity in the 200k house in 25 years time? If its an IO mortgage you wont have any equity other than ambient house price increases - which means the place you want to down size to will also have become more expensive.

Generali

How do you approach a conversation like that?

"Muuum, you know how you're really old and are going to die soon anyway? Do you mind giving me the inheritence now and living somewhere really small rather than in the home you worked all your life for?"

My Dad would give me a good thrashing. And I'm 36 and he's cremated!!!

CB1979_2

don't make any plans on thinking you'll defo get inheritance, that's for sure!

also i wouldn't take an I/O mortgage for 25 years perhaps for the first few years to get accustomed to the new increase in payments but certainly not for the whole term.

and let's not forget the little task of raising fees for your kids university tuition (or be smart and persuade them not to go! lol)

Running_Horse

pulliptears wrote: »

we will still be very much in profit

Where is this profit?

You cannot spend it (yet). It has to go towards the next house, which is even more expensive than it would have been if you had not made so much "profit". If you can afford it, surely it is always better to be reducing your debt? Then when you downsize, you will have even more "profit" left over.

ps. Waiting for inheritances is unwise and a little distasteful.

pulliptears

Generali wrote: »

How do you approach a conversation like that?

"Muuum, you know how you're really old and are going to die soon anyway? Do you mind giving me the inheritence now and living somewhere really small rather than in the home you worked all your life for?"

My Dad would give me a good thrashing. And I'm 36 and he's cremated!!!

I never said that. I dont want any inheritance now and never said I did. I said that with the best will in the world my parents wont be around when the 25 years are up on the mortgage. Whichever way I look at it they are both ill and almost certainly wont be here. Sooner or later (and i hope its very much later) I will have their home. Believe me Id much rather have them, but as Mum is frail and Dad is terminally ill its not going to happen.

If I had my way they would have sold the big house they live in, moved to a small bungalow and be enjoying the extra cash now.

pulliptears

Running_Horse wrote: »

ps. Waiting for inheritances is unwise and a little distasteful.

read again.

Generali

Fair enough. Personally, I make a point not to base any of my financial plans on inheritance as I have no idea what the tax treatment of them will be (or even if I'll get anything). That's not the only way but it is the way I view things.

If you're not asking your parents for the money, isn't the 4th para a non sequiteur? Am I missing something?

nobblyned

Generali wrote: »

How do you approach a conversation like that?

"Muuum, you know how you're really old and are going to die soon anyway? Do you mind giving me the inheritence now and living somewhere really small rather than in the home you worked all your life for?"

My Dad would give me a good thrashing. And I'm 36 and he's cremated!!!

I think the OP meant the parents should downsize to release money for themselves rather than the OPs house aspirations!:D

pulliptears

I understand what you are saying, the position Im in isnt pleasant. My parents were quite old when I was born (Im an only child) and up until last year I happily went through life believing (as a child does) that they will always be there for me.

having watched them both get ill, and Dad deteriorate so rapidly its really been hard to realise that Im not going to have them for long. I spend as much time as I can with them now.

They refuse to move, the one thing they have always been consistent about is I should have the house. so much so when dad was diagnosed they made a will whereby when one of them passes a 50% share of the house passes to me. I have even suggested we club together, buy something larger and they live with us, but again they refuse

We are in a position now where what we do now will affect us financially for the rest of our lives and we would be silly to ignore the inevitable, yet distressing fact that there will be an inheritance there before the mortgage ends.

The plan was when I do inherit, whenever that may be, we use that money to pay off some of the mortgage.

pulliptears

nobblyned wrote: »

I think the OP meant the parents should downsize to release money for themselves rather than the OPs house aspirations!:D

Yes, thank you! I didnt phrase that very well at all did I