Pil have been mortgage free for many years. They would like to move to a more expensive area. There is a shortfall between their house value and that of a similar place in the new area. Their place is already pretty modest so no ability to 'downsize'. So, they have proposed using some savings then using the Homewise scheme to bridge the £ gap. As I understand it, a company provides the additional funds and therefore owns part of your property, and when you either move, die, or move into care they take a further chunk of equity.
Dh and I thought there must be a better way for them to arrange this... Dh is worried that because the house price and their equity is really low they would essentially be giving up control of where they live as they would never be able to afford to move again. They have moved a lot, although they say this is a final move (they said that last time. And the time before come to think if it!). Also, they have always been very frugal and almost morbid in the way they speak of dh's 'inheritance'. We have always told them we would rather they spend savings as they see fit to enjoy their lives, and they did so to move a lot closer to us a few years ago.
After speaking to our IFA we are thinking of proposing to help them buy the house, thus avoiding any schemes. There are various ways of doing it, but apparently the ideal in the circumstances would be for them to provide the equity and further deposit if they can/wish, and us/dh to take a small specialist mortgage for the shortfall. We would own the house, pil would pay for the mortgage. We would make it clear that in all practical ways outside of its purchase it is their house.
I'm just wondering if we have thought through all of the potential problems properly. It all seems easy in theory but I know this is the kind of thing with all sorts of potential drama..! I am happy to be able to help them but would hate for it to cause problems and we need to prioritise our own family and they would want us to! I think there's a 50/50 chance they'll turn down the proposal outright...
Relevant information:
Dh is an only child and we all have an excellent relationship. They helped us with a deposit for our first house.
They are their 70s in good health. They have a pretty good pension income.
The mortgage would represent approx 30% of the house value and would probably be interest only. It would be half the size of our current mortgage.
Our house is of much higher value than theirs and we have no intention of moving. Our mortgage is for approx a third of our house value.
We have a good savings buffer and are very comfortable in our current set up, although in no position to cover their shortfall (not that they'd ever accept it.)
We are in our 30s with two children.
We have discussed the possibility of doing some work on our house in a few years time, but it's a "wouldn't it be lovely" idea rather than a necessity. I think we would still have capacity to extend our own mortgage for this but wouldn't choose to do so for a while yet.
Thanks if you've read so far - let me know what potential disasters I'm missing!