Mums finances. Sister thinks I am up to something.

scatmanjohn

A little while ago my sister asked me to assist more with helping my aging Mum which was fair as she did a lot and I only did stuff if my sister couldn’t do it. Recently my mum became unwell and made me aware of her finances. She had £21k in a current account earning zero interest. She receives state pension topped up (pension guarantee) and gets attendance allowance. Also she has an outstanding lifetime mortgage currently amounting interest. She can make payments to reduce this without penalties (10% per year and then at 10 years can pay it off without penalties).
My thinking is pay 10% of the lifetime mortgage (£3k ish)which will save on the interest and reduce her savings which affects her pension credit if too high. I advised her then to move a chunk of the money in her current account to a savings account which will earn interest which can be used to make further over payments on the lifetime mortgage.

I set her up with internet banking which my sister is not happy about as she does not trust anyone. I got her to put a lock code on her phone as it was open to anyone which didn’t go down well either, even though she knows what it is ?

Sister has told Mum I am up to something underhand and she needs to leave everything as it is. She told her there is no point in earning interest as she won’t be around to spend it.

Am I giving her sound advice or have I lost my mind and sister is correct .
I just want some Independent input to show Mum

Thank you

flaneurs_lobster

Explain please how it is in your Mother's best interest to pay off any or all of a lifetime mortgage?

kimwp

If that was my financial situation, that's what I'd do - maybe slightly different figures depending on interest rates - but definitely look to pay off some of the mortgage debt to make sure pension income is not affected and be putting the remainder in a high interest account, rather than leaving it in the current account.

What is your sister actually worried about?

Voyager2002

Everything that you have suggested is very sensible. 

I do have some caveats, since I don't know how long your mother will live, how well she feels, and how able she is to cope with modern things like internet banking. 

For example, it is very prudent to use savings to pay off part of the mortgage and so reduce her interest bill: but not if she could otherwise spend the money on something that she would enjoy today, and might not be around for long enough to benefit from the reduced interest. Even if she has substantial savings, if some of that money is "invisible" in a savings account or has been used to reduce her mortgage, she will see less when she looks at the balance in her current account and so might feel she cannot afford something (that in reality she could afford easily).

kimwp

Voyager2002 said:

Everything that you have suggested is very sensible. 

I do have some caveats, since I don't know how long your mother will live, how well she feels, and how able she is to cope with modern things like internet banking. 

For example, it is very prudent to use savings to pay off part of the mortgage and so reduce her interest bill: but not if she could otherwise spend the money on something that she would enjoy today, and might not be around for long enough to benefit from the reduced interest. Even if she has substantial savings, if some of that money is "invisible" in a savings account or has been used to reduce her mortgage, she will see less when she looks at the balance in her current account and so might feel she cannot afford something (that in reality she could afford easily).

Ooh, good point, is there anything fun your mum wants to do? 

flaneurs_lobster

Have I misunderstood what a Lifetime Mortgage is? I thought that it need not be repaid until the death (or permanent residential homing) of the mortgagee at which point the property reverts to the lender.

scatmanjohn

flaneurs_lobster said:

Explain please how it is in your Mother's best interest to pay off any or all of a lifetime mortgage?

It’s more of a legitimate way to reduce her savings so it doesn’t affect the pension credits. 

Do you think it’s not in her best interests?

flaneurs_lobster

scatmanjohn said:

flaneurs_lobster said:

Explain please how it is in your Mother's best interest to pay off any or all of a lifetime mortgage?

It’s more of a legitimate way to reduce her savings so it doesn’t affect the pension credits. 

Do you think it’s not in her best interests?

If you just want to reduce your Mother's savings to £10k (the limit where pension credit isn't affected) then why not spend it on a decent holiday? Why pay off a mortgage that your Mother will never need to repay?

scatmanjohn

kimwp said:

If that was my financial situation, that's what I'd do - maybe slightly different figures depending on interest rates - but definitely look to pay off some of the mortgage debt to make sure pension income is not affected and be putting the remainder in a high interest account, rather than leaving it in the current account.

What is your sister actually worried about?

I think it’s more a loss of control thing. She is scared of internet banking and is not happy I have set Mum up with it on her phone. Mum is perfectly sane and can work it no problem. 

scatmanjohn

Voyager2002 said:

Everything that you have suggested is very sensible. 

I do have some caveats, since I don't know how long your mother will live, how well she feels, and how able she is to cope with modern things like internet banking. 

For example, it is very prudent to use savings to pay off part of the mortgage and so reduce her interest bill: but not if she could otherwise spend the money on something that she would enjoy today, and might not be around for long enough to benefit from the reduced interest. Even if she has substantial savings, if some of that money is "invisible" in a savings account or has been used to reduce her mortgage, she will see less when she looks at the balance in her current account and so might feel she cannot afford something (that in reality she could afford easily).

Thanks. I would prefer it if she spent it on herself but she says she is happy and doesn’t need anything. She is fine using the banking app and can see all her money as it’s with one bank.I think it’s best not to pay too much of the lifetime mortgage as it’s best to have some savings available in case of property repairs etc.

scatmanjohn

kimwp said:

Voyager2002 said:

Everything that you have suggested is very sensible. 

I do have some caveats, since I don't know how long your mother will live, how well she feels, and how able she is to cope with modern things like internet banking. 

For example, it is very prudent to use savings to pay off part of the mortgage and so reduce her interest bill: but not if she could otherwise spend the money on something that she would enjoy today, and might not be around for long enough to benefit from the reduced interest. Even if she has substantial savings, if some of that money is "invisible" in a savings account or has been used to reduce her mortgage, she will see less when she looks at the balance in her current account and so might feel she cannot afford something (that in reality she could afford easily).

Ooh, good point, is there anything fun your mum wants to do? 

I’d love her to treat herself but she says she is happy and doesn’t want anything in particular.