Equity Release thoughts

Blueskies113

Any advice welcome. My mother is 90, in good health and has a house worth roughly £330k. I am 57, have recently divorced and have a lump sum of £250k to find a 3 bedroom home for me and  kids. I work for the nhs and have very little pension as lived abroad therefore I doubt I would get a mortgage. 

My mother will leave her house equally to her 3 children. As I’ve been struggling to find properties for under £250k Equity release was suggested. As prices could potentially go down over the next ten years I wondered if my mother did ER for £80k (allowing for interest) and gave to me is this wise? Would this effect her pension credit and council tax credit if she is giving it straight to me? And if she lives for another ten years - would this most likely exceed what my two siblings would inherit? My mother wants to help me but I wouldn’t want to cause problems if she needed to downsize, needed residential care, or with my siblings in the future. 

(I am trying to persuade her to relocate and live with me but she’s on the fence about this option which I understand) All advice welcome. 

dimbo61

If Mum has £80,000 going into her account it Wil effect her Pension Credit and Council Tax payments.
Could you move in with Mum ?
£250 K deposit and a steady income should get you a small mortgage 
Do you need to stay locally ?

Blueskies113

I am staying at my mothers temporarily but we can’t all live here and my kids are about to leave university.  I can not afford near my mother so relocating near friends in Oxfordshire. We are relocating from London. 

If equity release is put straight in to my account does it still effect my mothers pension credit and council tax? If so I can possibly give her this money back. 

MWT

Blueskies113 said:

If equity release is put straight in to my account does it still effect my mothers pension credit and council tax?

Highly unlikely you will find the lender willing to send the funds straight into your account, especially if the intent is to do this to avoid the impact on her benefits as she would be obliged to declare the cash asset.

Blueskies113 said:

... And if she lives for another ten years - would this most likely exceed what my two siblings would inherit? My mother wants to help me but I wouldn’t want to cause problems if she needed to downsize, needed residential care, or with my siblings in the future.

If the value of the house remained unchanged then after roughly 7 years the interest would have rolled up to the point where it starts to exceed your 1/3rd share of the value, but that isn't really the biggest concern...

Firstly downsizing would not really be an option for her as there would be a need to repay either the entire amount released or a substantial part of it based on the suitability and value of the new property...

If she needed long term residential care then the house would have to be sold very quickly as the amount released becomes payable upon her entry into long-term care and the balance of the proceeds would be used to pay for that care thus greatly increasing the rate at which your advance would exceed your 1/3rd share of the residual funds by the time of her eventual demise...

... further, given her current age there is also the risk that there would be a claim that she had intentionally deprived herself of the amount given to you if the residual funds from the house sale proved insufficient to cover he care costs...

Blueskies113

Thank you for all this info - it’s hugely helpful.  I’m hoping that if she needed care she would come live with me but still, this is all quite bleak. 

MWT

Blueskies113 said:

Thank you for all this info - it’s hugely helpful.  I’m hoping that if she needed care she would come live with me but still, this is all quite bleak. 

Just to be clear, the equity release loan would still become repayable if she vacated her home to come and live with you, so that would still trigger the need to sell the property, but obviously without the care home fees that might be easier to manage.

Blueskies113

Yes, understand that it would be repayable as soon as she wasn’t living here for whatever reason. Thank you.