Does this plan make financial sense?

DayTripper1984

I currently own a property with my (now ex) partner, with a mortgage left of around £153,000. My plan is to buy her out, for which I would need to raise around £60k.
I can remortgage and borrow an additional £10k comfortably - my monthly payments would be around £550 with the additional borrowing (if I pay £2k in early release and remortgage at a low rate of a 1.4%)
With the remaining £50k, my current plan is for my parents (in their late 70s and 80s) to give me £50k through equity release on their property, and I would pay the monthly interest payments (around £100-£120) to keep the borrowing flat at £50k. 

I would hope to be able overpay on the mortgage and/or the equity release loan (as and when possible).

Does this make financial sense? Would there be any better way of doing this? I also have around £7k in savings and am currently able to put back around £300-£500 per month.
I would also look into taking in a lodger, which would be another £500 a month income.

ratrace

With all due respect please dont drag your elderly parents in to your financial situation, and put the roof that they have worked so hard, the last thing they need is worrying about the roof over their heads at that age. the reason i feel stong about this is that i know someone whoes dad sadley killed himself when he lost his house as his son remortgage the house to open a business which went bust so as a result his old man lost his house and could not cope with that.

i sympathize with your situation i really do you have to look at alternatives rather going down that avenue you proposed. if it means starting from scratch then so be it, your not the first and wont be the last im sorry if i have come across harsh but believe me you wont regret it.

DayTripper1984

ratrace said:

With all due respect please dont drag your elderly parents in to your financial situation, and put the roof that they have worked so hard, the last thing they need is worrying about the roof over their heads at that age. the reason i feel stong about this is that i know someone whoes dad sadley killed himself when he lost his house as his son remortgage the house to open a business which went bust so as a result his old man lost his house and could not cope with that.

i sympathize with your situation i really do you have to look at alternatives rather going down that avenue you proposed. if it means starting from scratch then so be it, your not the first and wont be the last im sorry if i have come across harsh but believe me you wont regret it.

It would be a lifetime mortgage equity release, so they wouldn’t be in any danger of losing their house.

Grumpy_chap

DayTripper1984 said:

I currently own a property with my (now ex) partner, with a mortgage left of around £153,000. My plan is to buy her out, for which I would need to raise around £60k.
I can remortgage and borrow an additional £10k comfortably - my monthly payments would be around £550 with the additional borrowing (if I pay £2k in early release and remortgage at a low rate of a 1.4%)
With the remaining £50k, my current plan is for my parents (in their late 70s and 80s) to give me £50k through equity release on their property, and I would pay the monthly interest payments (around £100-£120) to keep the borrowing flat at £50k. 

I would hope to be able overpay on the mortgage and/or the equity release loan (as and when possible).

Does this make financial sense? Would there be any better way of doing this? I also have around £7k in savings and am currently able to put back around £300-£500 per month.
I would also look into taking in a lodger, which would be another £500 a month income.

I won't comment on whether or not it is the correct thing to take £50k from your parents, but if this proceeds, is it proposed that the £50k would be a gift?

Is that certainly a gift without reservations?

Has there been consideration that the gift may not be fully exempt from IHT subject to timescales and whether or not IHT would be applicable to your parent's estate?

What consideration would there be for meeting care home fees should your parents require this?  Is the £50k gift a regular and affordable sum for your parents?  The fact they need equity release might suggest it is not and this could be considered "deprivation of assets".

If your parents can really afford this £50k gift, it would be better if they were to gift the money from savings rather than equity release.  Does the fact you suggest equity release mean your parents don't have other funds and can't really afford to make this gift?

What is your plan to clear the balance of the £50k?  You say you would pay the monthly interest, so do you expect the future inheritance of your parent's property to be the means to clear the debt?  Relying on future inheritance is not necessarily wise.

Assuming your parents do equity release for £50k should they / would they like to be doing something more for their benefit with the funds?

Do you have any siblings that might also need a substantial cash injection?  Are your parents able to meet that should the need arise?

Is this your idea or your parent's idea?

There are a lot of points of consideration here that you make have already been through and simply not covered in the OP, but that was not clear so I've asked the questions as prompts of some of the wider considerations.

If this were me, and this was my idea, I would not be approaching my parents at my more adult stage of life as there comes a point when we all have to stand on our own two feet.

Have you fully assessed all options for raising the finance from your own means before considering relying on your parents?  If you can do that you will feel greater pride and satisfaction at achieving the goal.  You've made very little mention of your income, other financial commitments, anything that could be cut back (cheaper car?) to make this desired outcome more achievable without laying the burden at your parent's door.

DayTripper1984

Grumpy_chap said:

DayTripper1984 said:

I currently own a property with my (now ex) partner, with a mortgage left of around £153,000. My plan is to buy her out, for which I would need to raise around £60k.
I can remortgage and borrow an additional £10k comfortably - my monthly payments would be around £550 with the additional borrowing (if I pay £2k in early release and remortgage at a low rate of a 1.4%)
With the remaining £50k, my current plan is for my parents (in their late 70s and 80s) to give me £50k through equity release on their property, and I would pay the monthly interest payments (around £100-£120) to keep the borrowing flat at £50k. 

I would hope to be able overpay on the mortgage and/or the equity release loan (as and when possible).

Does this make financial sense? Would there be any better way of doing this? I also have around £7k in savings and am currently able to put back around £300-£500 per month.
I would also look into taking in a lodger, which would be another £500 a month income.

I won't comment on whether or not it is the correct thing to take £50k from your parents, but if this proceeds, is it proposed that the £50k would be a gift?

Is that certainly a gift without reservations?

Has there been consideration that the gift may not be fully exempt from IHT subject to timescales and whether or not IHT would be applicable to your parent's estate?

What consideration would there be for meeting care home fees should your parents require this?  Is the £50k gift a regular and affordable sum for your parents?  The fact they need equity release might suggest it is not and this could be considered "deprivation of assets".

If your parents can really afford this £50k gift, it would be better if they were to gift the money from savings rather than equity release.  Does the fact you suggest equity release mean your parents don't have other funds and can't really afford to make this gift?

What is your plan to clear the balance of the £50k?  You say you would pay the monthly interest, so do you expect the future inheritance of your parent's property to be the means to clear the debt?  Relying on future inheritance is not necessarily wise.

Assuming your parents do equity release for £50k should they / would they like to be doing something more for their benefit with the funds?

Do you have any siblings that might also need a substantial cash injection?  Are your parents able to meet that should the need arise?

Is this your idea or your parent's idea?

There are a lot of points of consideration here that you make have already been through and simply not covered in the OP, but that was not clear so I've asked the questions as prompts of some of the wider considerations.

If this were me, and this was my idea, I would not be approaching my parents at my more adult stage of life as there comes a point when we all have to stand on our own two feet.

Have you fully assessed all options for raising the finance from your own means before considering relying on your parents?  If you can do that you will feel greater pride and satisfaction at achieving the goal.  You've made very little mention of your income, other financial commitments, anything that could be cut back (cheaper car?) to make this desired outcome more achievable without laying the burden at your parent's door.

My parents’ estate would be under the IHT threshold, so no concerns there.
The idea is that their house will be sold and money from sale split between siblings when they have both passed away; the my share of the house will have the money needed to pay off the lifetime mortgage deducted from it.
My salary is around £36k and I don’t know any other way that I could (legally!) raise £50k in al short space of time.

Grumpy_chap

DayTripper1984 said:

The idea is that their house will be sold and money from sale split between siblings when they have both passed away; the my share of the house will have the money needed to pay off the lifetime mortgage deducted from it.

Is this your idea?
Or your parent's idea?
Or your sibling(s) idea?
Are all interested parties in agreement that the plan is a good and fair one?

You see, it is quite possible that, once care home costs and such like are met, the value of your parent's estate is diminished by the time of death from what it is now.  In the extreme, that could even be below the £50k advance payment you have received through the equity release so then leaves you needing to reimburse your other sibling(s) for their share of the inheritance.  In fact, if deprivation of assets was considered, you may even need to reimburse some of this "early inheritance" prior to your parent's passing to support their lifetime needs.  

In general, any financial plan that relies upon a future inheritance is open to all sorts of unforeseen matters that can cause the plan to derail.

MEM62

DayTripper1984 said:

With the remaining £50k, my current plan is for my parents (in their late 70s and 80s) to give me £50k through equity release on their property, and I would pay the monthly interest payments (around £100-£120) to keep the borrowing flat at £50k. 

This smacks of desperation.  If you cannot afford to buy your partner our of the house based on whatever equity is in it and your income then you cannot afford to buy them out at all.  Surely you care for your parents too much to drag them into your financial problems.  

DayTripper1984

Grumpy_chap said:

DayTripper1984 said:

The idea is that their house will be sold and money from sale split between siblings when they have both passed away; the my share of the house will have the money needed to pay off the lifetime mortgage deducted from it.

Is this your idea?
Or your parent's idea?
Or your sibling(s) idea?
Are all interested parties in agreement that the plan is a good and fair one?

You see, it is quite possible that, once care home costs and such like are met, the value of your parent's estate is diminished by the time of death from what it is now.  In the extreme, that could even be below the £50k advance payment you have received through the equity release so then leaves you needing to reimburse your other sibling(s) for their share of the inheritance.  In fact, if deprivation of assets was considered, you may even need to reimburse some of this "early inheritance" prior to your parent's passing to support their lifetime needs.  

In general, any financial plan that relies upon a future inheritance is open to all sorts of unforeseen matters that can cause the plan to derail.

Any other ideas for raising that sum of money?

DayTripper1984

MEM62 said:

DayTripper1984 said:

With the remaining £50k, my current plan is for my parents (in their late 70s and 80s) to give me £50k through equity release on their property, and I would pay the monthly interest payments (around £100-£120) to keep the borrowing flat at £50k. 

This smacks of desperation.  If you cannot afford to buy your partner our of the house based on whatever equity is in it and your income then you cannot afford to buy them out at all.  Surely you care for your parents too much to drag them into your financial problems.  

I’ve done a lot of work to the house and got it just how I want, so really would like to try and keep hold of it if possible.

Grumpy_chap

DayTripper1984 said:

Any other ideas for raising that sum of money?

No-one can assist with that broad question based upon the very limited information you have shared so far:
£36k annual income
£7k savings

What other liabilities do you have?
Do you have any saleable assets?

Can you make other life-style arrangements?  Smaller house?

Is your Ex in a position to buy you out?

Are there children involved and what arrangements for their living space?

How old are you?

Can you take on second job to increase income?

This thread is seeming very "OP-centric" and no willingness to respond to any other observations or queries made.  That is all quite important - if your parents would not be agreeable the whole idea is irrelevant.

MovingForwards

Having a £50k loan from your parents may not be well received by lenders and it will reduce your affordability further.

You've put more info about your outgoings in this thread:
https://forums.moneysavingexpert.com/discussion/6300951/advice-need-please-what-monthly-rent-mortgage-would-be-affordable-for-me/p1