Does this plan make financial sense?

p00hsticks

I'd add my support to the other comments saying please don't involve your parents in this. If they had plenty of spare savings and were able to comfortably self fund any future care needs going forward that might be different, but from what you are saying it sounds like they have minimal savings and if they are going to take out equity release at this time of their lives, morally it should be for their benefit rather than yours. And with siblings involved as well, then in my opinion, it's a potential can of worms that is better left unopened.

Thrugelmir

DayTripper1984 said:

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.

Unfortunately that's a consequence of relationship breakdown. Better to start afresh with something that's affordable then move on with your life from there. 

Grumpy_chap

DayTripper1984 said:

Any other ideas for raising that sum of money?

Ah, well, we now know a lot more:

MovingForwards said:

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

DayTripper1984 said:

Hello, due to a separation from my (now ex) partner, I will need to live on my own. We own a house together on a mortgage and she has agreed that we can either sell it and split the money from the sale, or that I can buy her out and keep the property myself. My preference would be to buy her out and keep the property, as I have done a lot of work to the house.
I have spoken to my mortgage lender and I would be able to borrow the required additional money to pay her off and keep the house; however, I am wondering if, although it might be technically possible, whether I would practically be able to afford this.

The monthly payments are going to be around £750 and my take home wage each month from fulltime employment after tax and pension contributions is just over £2100 (circa £36,000 a year before deductions). I also do some other casual work, which on average means I get an additional £200-£250 a month.

My only other committed spends per month is £260 for a car on a 4-year lease, for which I have 2 years left to run and then petrol, which is about £30 a week. I have no kids or dependants either. 

What are your thoughts on whether those monthly mortgage payments are realistic for me and what level of spare cash I might have at the end of each month?

It would be far preferable (and, IMO, morally correct) to take the mortgage which your lender has confirmed you can secure than to burden your parents at their late stage of life, possibly impacting their quality of life and / or opening a chasm with your siblings.

With the £36k salary (£2,100 per month take home) 
Plus second job (£200 - £250 per month)
Plus lodger (£500 per month) as per OP of this thread

Meeting a £750 per month mortgage should be affordable.  Especially if you secure a fix on that mortgage rate to give stability and forecast for the near- mid-term.

One other option that may improve affordability would be if the car payments can be avoided. 
Is the car truly a lease, or is it PCP?
Ending a lease early is not always straightforward, though there may be an early-termination / break clause that you can use - what does the agreement say?
If the car is actually on PCP, which is more common for private use, then the car can be sold and the finance settled at any time.  With current inflated used car prices, that may well yield sufficient equity to buy a cheap runabout as well as reducing the monthly outgoings.
That would give the OP an option - is the priority to keep the car or keep the house?

Exodi

Sorry, but I think it's quite shocking the OP could borrow the additional money, but would rather his elderly parents with negligble savings equity released their property to give him, potentially causing a myriad of problems down the line at his parents/siblings expense.

I know plenty of people that have higher rents/mortgages on lower incomes than you would have (though they don't spend £20 a month on the lottery and £60 on broadband).

The whole thing smacks of selfishness in my opinion.

DayTripper1984

Exodi said:

Sorry, but I think it's quite shocking the OP could borrow the additional money, but would rather his elderly parents with negligble savings equity released their property to give him, potentially causing a myriad of problems down the line at his parents/siblings expense.

I know plenty of people that have higher rents/mortgages on lower incomes than you would have (though they don't spend £20 a month on the lottery and £60 on broadband).

The whole thing smacks of selfishness in my opinion.

I can't borrow all the additional money, that's the point. I am also cutting out unnecessary spend to help the situation. Cut my tv/phone/broadband down to just £42 now and mobile down to £5 a month.

Exodi

DayTripper1984 said:

I can't borrow all the additional money, that's the point.

That's not what you said in the other thread...

DayTripper1984 said:

I have spoken to my mortgage lender and I would be able to borrow the required additional money to pay her off and keep the house

So which is it?

It's great you've cut your TV/phone/brodband down to £42 (even though it seems like your 'TV' doesn't include netflix, and your 'phone' doesn't include your mobile). For comparison mine is half yours. You didn't mention cutting out the £20 a month for the lottery?

I think I'll leave this thread after this post. Good luck OP.

Grumpy_chap

One tool the OP could try to identify where there can be efficiencies made to make the large mortgage more affordable would be to follow the process in the DfW boards and prepare a S-o-A (statement of Affairs) as a first step. 

I know that is a tool developed to help people facing a debt challenge, but I don't see why it cannot be applied as a tool for anyone looking to challenge their financial status-quo and make life-style changes / achieve goals.  The OP has both a life-style change (divorce / separation) and goal (retain the house which so much toil has gone into).  

The OP may prepare the S-o-A and see options that make retaining the house more achievable, or may share in the DfW forum if further review would be beneficial. 

The OP can then asses their priorities versus keeping the house. 
Does the OP want to keep the house more than the late model car, Netflix, etc.?
Are any of the expenses identified by the OP changed by COVID?  For example, if the OP is travelling to work less (more WFH), then the monthly petrol expense may be less.

DayTripper1984 said:

My monthly expenses are:

• Car lease £260pm
• Petrol £130-£150pm
• TV/phone/broadband is currently £60
• Mobile phone £26
• Estimate of Gas/Electric £70pm
• Estimate of water for single occupier £30
• Council tax for single occupier £144
• Home insurance £15
• Netflix & Spotify £20 combined
• 2 different lottery entries £20 combined 
• TV Licence £13.37

Annual payments

• Car parking (£420)
• Car Insurance (£200)

The OP still does not appear to have commented on many of the questions that have been asked and answers to these points will help others in the forum provide support.  In particular, the questions about whose idea this plan is and whether deprivation of assets may be a consideration.

DayTripper1984

Exodi said:

DayTripper1984 said:

I can't borrow all the additional money, that's the point.

That's not what you said in the other thread...

DayTripper1984 said:

I have spoken to my mortgage lender and I would be able to borrow the required additional money to pay her off and keep the house

So which is it?

It's great you've cut your TV/phone/brodband down to £42 (even though it seems like your 'TV' doesn't include netflix, and your 'phone' doesn't include your mobile). For comparison mine is half yours. You didn't mention cutting out the £20 a month for the lottery?

I think I'll leave this thread after this post. Good luck OP.

In the other thread, I included the Equity release as part of the borrowing, for simplicity.

In my new TV deal, Netflix will be included in the £42 package (TV, Broadband, Telephone and Netflix).

By reducing my 'phone' to £5, I mean my mobile phone. Lot

Lottery will probably go too.

DayTripper1984

Grumpy_chap said:

One tool the OP could try to identify where there can be efficiencies made to make the large mortgage more affordable would be to follow the process in the DfW boards and prepare a S-o-A (statement of Affairs) as a first step. 

I know that is a tool developed to help people facing a debt challenge, but I don't see why it cannot be applied as a tool for anyone looking to challenge their financial status-quo and make life-style changes / achieve goals.  The OP has both a life-style change (divorce / separation) and goal (retain the house which so much toil has gone into).  

The OP may prepare the S-o-A and see options that make retaining the house more achievable, or may share in the DfW forum if further review would be beneficial. 

The OP can then asses their priorities versus keeping the house. 
Does the OP want to keep the house more than the late model car, Netflix, etc.?
Are any of the expenses identified by the OP changed by COVID?  For example, if the OP is travelling to work less (more WFH), then the monthly petrol expense may be less.

DayTripper1984 said:

My monthly expenses are:

• Car lease £260pm
• Petrol £130-£150pm
• TV/phone/broadband is currently £60
• Mobile phone £26
• Estimate of Gas/Electric £70pm
• Estimate of water for single occupier £30
• Council tax for single occupier £144
• Home insurance £15
• Netflix & Spotify £20 combined
• 2 different lottery entries £20 combined 
• TV Licence £13.37

Annual payments

• Car parking (£420)
• Car Insurance (£200)

The OP still does not appear to have commented on many of the questions that have been asked and answers to these points will help others in the forum provide support.  In particular, the questions about whose idea this plan is and whether deprivation of assets may be a consideration.

It was my suggestion initially, which I then discussed with my parents and financial advisor.
We've since talked about another idea, where I would borrow as much as I can realistically afford from my mortgage lender and then borrow some money from my parents, which I would pay back monthly (interest free).

Grumpy_chap

And has "deprivation of assets" been considered?  If not, how will your parents fund care if the needs arises?