Getting equity from my parents house (no mortgages involved).

carer4mum

My mum has lived on her own since my dad died, but now has developed dementia. She still lives in her own house with the help of carers. Even with council funding, her income is not enough to cover all her care costs. We have been using her savings to cover the difference, but now they are almost gone. She is happy living in her house and I want it to continue by using some of the equity in her house.

Her house is fully owned by her and worth around £200k and I have LPA for her finances. I heard that her savings need to be under £23,250 in order to qualify for council funding, so I want to get £20k equity from her house and put it into her savings. I could go to an equity release company or I could use my own savings somehow. This is where I need some advice.

I have £20k in my savings that I'm willing to use, but would it be better to buy a share (10%) of her house or loan her the money against the house? What are the pros and cons of either method? What do you advise?

dimbo61

I don't think you can buy 10% of a property.
Now you can place a charge on a property but that costs money to set up.
I take it your mum has more than £23K in savings at the moment  ?
If you have LPA you have to act in her best interests 

silvercar

Are you an only child? Why do you need the loan secured? You could lend her the money and draw up a witnessed statement that it is a loan repayable on death with interest at an agreed rate. 

dimbo61

Mum has dementia !

Brie

I'm confused as to why you want to top up her savings.  The council should be providing the care as soon as her savings are under about £23k+ but won't be interested in the value of the house as long as she is living there.  

Do you feel there's a problem with her remaining at home?  Given that you say she has dementia is she safe at home when there's no one there?  Should she actually be moving to someplace more secure?  (Not to scare you too much but we had to bring inside one of our elderly neighbours who was wandering around outside her house in the middle of the night wearing just her nightie).  Or is it your intention to top up what the council will provide by continuing to also have private carer(s) available?

By you accessing her equity may cause issues with the council or simply make it more complicated to keep them adequately engaged as they will so want to let you pay for everything. 

Keep_pedalling

Once her savings have fallen below £14,250 they should no longer be taken into account as far as her contribution to her care costs so unless you have hired private carers you should not be looking at ER for funding.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-homecare/

You need to speak to her social worker ASAP with regard to her financial position.

It is highly likely that at some point she will need residential care, so preserving the equity in her home until that point is important as it will provide more options on what home you can choose for her. 

carer4mum

My mum's savings are less then £3k, hence topping up with £20k would still be below 23k. I'm not the only child, but my other siblings aren't involved in caring for my mum.

Keep_pedalling said:

Once her savings have fallen below £14,250 they should no longer be taken into account as far as her contribution

I didn't realise about this lower figure. I may have to release less money then, although the house requires some maintenance work and other expenditure, so I'm sure we can get the money below £14250 with a £20k equity release.

Brie said:

I'm confused as to why you want to top up her savings.  The council should be providing the care as soon as her savings are under about £23k+

The council does provide care, but not all the required care to remain at home. The council will only provide a maximum of 4½ hours care per day. If a person requires more than this, the council will then fund 24hr residential care (apparently, the cost to them is about the same).

To keep my mum living at home requires paying private carers to cover the extra hours that the council doesn't, so that she is never left alone. Her social workers have stated that it is "in her best interest" to continue living at home with the current support package.

One day she will go into residential care and this will be paid for from her remaining house equity. So, we might as well use the equity now to keep her living where it is in her best interest.

Does anybody have any advice on how best to use her house equity to top up her savings (to answer my initial question)?

Thanks

carer4mum

I'm asking which is the best option for releasing equity from my mother's house, should I buy a share of her house or loan her the money against the house?

I would be very grateful if anyone could offer any advise on equity release. Does anybody have any experiences or knowledge that is relevant to my question? Any help would be appreciated.

elsien

I’m not sure why people are commenting about you acting in her best interests, because your plan is very much to allow her to stay at home which everyone is agreed is best for her at the moment.

I can’t really answer your question other than to say that if you are buying a percentage of the house and 10% is possible, then you’re probably into the realms of getting a proper survey as opposed to an estate agents valuation to show how you’ve arrived for the figure for what the house is worth,  and what your 20K is equivalent to.

On the face of it, the loan against the property seems like the more straightforward version. But probably worth getting some proper legal advice about in case there’s any pitfalls that you’re not aware of.

EssexHebridean

Not directly related to the original question, but I take it you are aware of and have sorted the council tax situation if your Mum has what I presume would be included under the heading of a "severe mental impairment"?  It means that providing her diagnosis qualifies her she is disregarded for council tax purposes - meaning either nothing may be payable, or if there is just one other person living there then they may qualify for the 25% reduction. 

km1500

Don't do equity release.

Don't buy a share - you will be in to excess stamp duty (assuming you already own a home), fees etc.

Lend her the money, get a charge on the house if you feel you need the loan secured, otherwise a Declaration of Trust.

It is not a difficult thing for a solicitor to do.