PIL want us to buy their house

On other posts, people normally recommend speaking to Stepchange or Citizens advice about debt as a starting point. Secondly, to look at their income & expenditure.

Suggest, do they have a spare room that they can rent out for extra income. As per info on Government website, a person can earn £7000 tax free per year.

Suggest selling & down sizing, should be an option once all other options have been investigated

It is not your responsibility to bail them out of their situation

If they SOLD the home to you they would be able to continue living there with no tax consequences for them. You have the home they have the cash. No loss of value to their estate. You would pay CGT on sale on increase in value as not your residence so doesn’t qualify for relief.

it if it’s GIFTED to children there can be issues with IHT. (You have the home they have nothing) However it’s only going to be an issue if the estate is valued over the IHT tax free allowance which for a married couple with no lifetime gifting is potentially £1m. With a property value of £220 this may not be relevant. The issue is that the gift is a ‘gift with reservation of benefit’ (GROB) ie retain the benefit of living there. If it’s a GROB it’s still included in your estate on death (even though you don’t own it anymore) so can mean more IHT is payable (but only if the total takes you over allowances)

No, no, no
unless you have spare money to help them .

Maybe. However your ongoing costs (council tax, energy bills etc) might br reduced enough to make it worth considering for long term savings.

I don't have experience of the mortgage situation but I wouldn't want to take on that responsibility as there's no guarantee they would/could continue to pay. Not sure any mortgage company would agree to it anyway.
My parents did equity release 15 years ago when in their seventies after discussing it with me and my siblings (we actively encouraged it) and the interest is now as much as they originally borrowed and will continue to build up.
It did look like a poor decision for the first few years but the amount owed could never exceed the value of the house unlike some earlier versions of equity release. The house has since tripled in value so there is, for now, plenty of equity for us to inherit. (Much to Mum's relief - she definitely had reservations)
General consensus is that equity release is not a good thing but it's actually a great thing for the homeowner. Why struggle financially or move into a tiny flat when you have an asset you can use?
It's potentially not a good thing for any beneficiaries but, as is often quoted on Mumsnet, no one is entitled to an inheritance.

Not that I would do this, but a better solution would be for them to sell their house and move in with you and pay a small rent/contribute to your mortgage/bills.

In the house and use the equity to pay the mortgage and top up their income.

There are many types of equity release, including 'lifetime mortgage' which you can pay just the interest on and hence it doesn't roll up. Property then doesn't have to be sold till last person dies or goes into care- if they released say £65k , they would have about £400 a month repayments- which if they kept cash from the 65k should be very doable- really depends what level of debts they have.

Saying that older people should downsize is so naive. The cost of moving house quickly eats up any equity.

The house next door to me has one less reception room and one less bedroom. Yet if I sold mine and bought that, I wouldn't make a penny after estate agents fees, stamp duty, legal fees and moving costs. Then there's an the extra stuff like redecorating or flooring that needs replacing etc etc.

As I understand it, OP will get a mortgage to buy the house off PIL. This will give PIL £220 cash from the sale of the house, from which they can pay the mortgage payments for OP. This is why they can pay the mortgage even though they're not coping at the moment with just their pensions and no capital.

Where will they live? Is the idea that they will continue to live in the house? So where will OP live? Either OP will be paying rent and seeking a mortgage, or will be seeking a second mortgage on a second house. I can't envisage mortgage companies being happy about a third party being responsible for the repayment, so I think this is a non-starter.

Or will PIL vacate the house and OP give up their current living arrangements and live in it. This will make it easier to get a mortgage, but PIL then have to find themselves somewhere to live and this will eat up the proceeds of the sale.

They need to downsize to a flat. Not sure this will help. £220 isn't a lot for a property, how much would they need to pay for a flat, and how much equity would this release after the costs of moving have been paid?

developments for 50+ /60+ etc are often a lot cheaper than similar properties on the open market - there are service charges, but when I calculated it for my Dad a few years ago; there wasn't a lot of difference between the service charge and what he was paying for general maintenance, gardener, window cleaning, insurance, etc.
Plus the comfort of having a warden available as he became more infirm, company around him, etc was useful.
Utilities were very low as it was a modern well designed building.

Don't do it.

They need to learn to live within their means ideally.

Best thing would be for them to move somewhere smaller and cheaper and free up capital.
Equity release - never a good idea, what will they do when all that moneys gone?

This🖕if they can't afford to live within their means now how are they going to find additional money to pay a mortgage/rent? What will you do when they default/stop paying rent (highly likely if their money management is poor). Can you afford to sub them for the rest of their lives?
They need to downsize to a flat. Not all flats have problematic service charges especially those where v the freehold is shared between the leaseholders.

If they sell you their home they won’t be able to continue living in it , we were told when writing wills and setting up POA. Inheritance tax issues I think

If they're in good health could they not work? Plenty in their early 70s do.

This. Paying the mortgage will be more than currently. Although they’ll have the money from the sale they’ll blow through it quickly and do you have the funds to pay for a second home? Deprivations of assets? What if you need to sell it? You’ll pay stamp duty on a second home and have a crap mortgage rate on a buy to let home.

Where they are going to live after selling it to you? It’s a bit unclear

Could they downsize so they could pay off their debts and have a little extra left over?
If they do equity release , the interest is just rolled over every year, and as they are only in their seventies , there is unlikely to be anything left when they go, or for long term care.

I really think they should not do equity release. They would live to regret that.

How do they think they could pay for the mortgage on it when they are both on state pensions and can't manage as they are?

Their only option is to sell it and move to a smaller place. That would give them lower bills and some money in the bank.

Just be careful if they look at flats though because of the service charge.

Equity release probably not the wisest financially but might be only option when other avenues exhausted. Ideally they should sell up and downsize.
don’t take their financial situations into your hands. They will end up not paying you.

They are already not living within their income. How will they afford a mortgage on top?

I would not offer to buy it. They need to look at equity release or downsizing.

If they are on state pension, they won’t be able to pay the mortgage and they will run down the cash a lot faster than they expect.