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AIBU?

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Original poster

PIL want us to buy their house

197 replies

Gogodonu · 04/06/2024 22:52

Anyone have any advice or experience with the following situation
My PIL are in their early 70s and in good health, they are struggling with cost of living increase and although mortgage free have ran up some debts and just not managing to live on their income well. Their only source of income is the state pension.

Their home is worth approx 220k. They want to either do an equity release or for us to buy their home and they pay the mortgage on it. We have reservations about the second option encase they spent all the money and couldn’t pay the mortgage.

Does anyone have any experience with this?

Thanks

OP posts:
LakieLady · 05/06/2024 16:58

SeatonCarew · 05/06/2024 15:40

If they are in their 70s they may well be on the lower state pension. Also, only about half of people ever qualify for the full state pension. It's well worth ensuring you've paid enough NI contributions to qualify.

However, if that were the case I'd expect them to qualify for top up benefits. There's a lot of information missing here OP, are you sure you fully understand their financial situation? I think the advice to steer clear of mortgaging on their behalf is very sound. Please don't be guilted into unwise long term commitments.

Is this a new situation, or have they been profligate in the past? That would greatly influence my attitude to trying to help them.

The pension credit rate for a couple is now £332.95pw, so if their income is less than that, it could be topped up to that amount.

NoBinturongsHereMate · 05/06/2024 17:01

@AcrossthePond55 they don't have a mortgage now. They are proposing the OP takes out a mortgage to buy their house and give them a chucnknof capital to pay off debts, and then they make the repayments for her.

It doesn't make a lot of logical sense.

Aligirlbear · 05/06/2024 17:18

Crikeyalmighty · 05/06/2024 16:46

@Aligirlbear as I posted a while back- there are lifetime mortgage equity loans these days where you can pay just the interest so that it doesn't roll up and equity isn't eaten away- it is only paid off when last person goes into care or dies.

They could draw enough down to use some for the monthly interest payments and some to clear debt and give them a surplus in bank- but it's all relevant to how much their actual debts are as OP hasn't said- if they drew down £80k they would have interest payments of around £500 a month - say they have £14k of debt - that would leave them £66k in bank and repayments of around £5k a year in interest - it's doable - but only if they reign it in- depends whether the debt was incurred due to actually having debt or if it's one of them wants a holiday 4 times a year etc. it can be changed too at any point to interest not being paid and going on roll up- maybe that's something to consider if they are in their 80s -

hear what you are saying but essentially end result is the same but dressed up differently - interest roll up eats away the equity and if you pay the interest monthly you are using the money you raised from the equity loan to cover the interest ! You can look at it in two ways 1) No one cares because they don’t expect to inherit anything or 2) parents are upset because they had hoped to leave something for their family - very much depends on the parents outlook and as you say the underlying issue for the debt in the first place.

Crikeyalmighty · 05/06/2024 18:04

@Aligirlbear yep I agree- if it's that they are just massive overspenders relative to income then they would probably whip through their cash buffer far too quickly. But I think that will be a problem whatever they do-if it's card debt etc and they actually can manage on their income if they were not paying back all the time and building up new debt- I can see clearing it off and giving themselves a buffer might help - as you say one issue is family expectations too - plenty don't like it because there will be less to inherit - none is honest enough to admit that has crossed their mind. I certainly don't think the OP should involve themselves in a situation that may get messy.

beergiggles · 05/06/2024 18:07

OP, what makes them think you are in a position to take out a mortgage for their benefit?
I'd make it clear I have no spare funds, step away & let them make their own choices.

Pumpkinpie1 · 05/06/2024 18:11

Equity release is a terrible idea
Much better to downsize

sterli2323 · 05/06/2024 18:13

Depends on the debt really - if it is all unsecured then they should look at making token payments/write off due to age and not being able to pay. Then work out a budget they can live within. Financing the house in any shape of form is the last resort.

NoBinturongsHereMate · 05/06/2024 18:22

one issue is family expectations too - plenty don't like it because there will be less to inherit - none is honest enough to admit that has crossed their mind.

While that's definitely a [usually unspoken] downside for many potential inheritors, equity release can also cause problem for the releasers themselves if they later need care home fees.

Crikeyalmighty · 05/06/2024 18:28

@Pumpkinpie1 it is- but we don't know what they have at the moment or if suitable things around in their area- for instance I'm having problems with 84 year old FIL who insists he only wants bungalows not flats - but the ones in our area are more expensive than the one he is selling and he doesn't want to look at other areas due to facilities etc

Parky04 · 05/06/2024 18:38

Equity release has its place, but it is the very last resort. It appears as though they are at that stage. There is no point in having money tied up in property if you can't afford to pay the bills!

AcrossthePond55 · 05/06/2024 19:05

NoBinturongsHereMate · 05/06/2024 17:01

@AcrossthePond55 they don't have a mortgage now. They are proposing the OP takes out a mortgage to buy their house and give them a chucnknof capital to pay off debts, and then they make the repayments for her.

It doesn't make a lot of logical sense.

Edited

Thanks, I missed that part (no mortgage).

I agree, it doesn't make a lot of sense unless OP can easily afford 2 mortgage payments AND wants to end up with a rental property.

I wonder if DH is an only child. Otherwise it could cause problems with his siblings when he 'ends up with the house'.

And I know there's a 'thing' about deprivation of assets when it comes to a person needing long term care in a care home. I don't know if selling a house to a child would fall under that.

Nightshade9 · 05/06/2024 19:31

Fizzadora · 04/06/2024 23:28

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.

Edited

100% this! We arranged a lifetime mortgage for my Nan and it was the best decision we ever made. Enabled her to stay in her house, near her friends and amenities and gave her a better quality of life.

Cherrysoup · 05/06/2024 19:39

You buy their house, you are therefore the landlord and charge rent to cover the mortgage? How will they afford that if they’re broke and paid off their mortgage? Makes no sense.

Whitesky75 · 05/06/2024 20:16

SeatonCarew · 05/06/2024 15:40

If they are in their 70s they may well be on the lower state pension. Also, only about half of people ever qualify for the full state pension. It's well worth ensuring you've paid enough NI contributions to qualify.

However, if that were the case I'd expect them to qualify for top up benefits. There's a lot of information missing here OP, are you sure you fully understand their financial situation? I think the advice to steer clear of mortgaging on their behalf is very sound. Please don't be guilted into unwise long term commitments.

Is this a new situation, or have they been profligate in the past? That would greatly influence my attitude to trying to help them.

What is LOWER STATE PENSION!??

Does it go down with age!?? Can someone enlighten me pls? I’m panicking here!

HumphreysCorner · 05/06/2024 21:12

We had this and have our own lovely house. FIL having sadly lost my MIL got with his neighbour and wanted a house together. We politely declined and they both sold their houses and have a new one together.

Crikeyalmighty · 05/06/2024 21:33

@Whitesky75 it's to do with when you started getting your pension - those who are just getting it now are on the rate you see mentioned- those who started a good few years ago are not on the same rate if I remember correctly -

SeatonCarew · 06/06/2024 07:14

Whitesky75 · 05/06/2024 20:16

What is LOWER STATE PENSION!??

Does it go down with age!?? Can someone enlighten me pls? I’m panicking here!

Show quote history

People who retired prior to April 2016 receive the old state pension at a current rate of £169.50 per week. Those who have retired since receive £221.20. If you haven't retired yet, you will be on the higher rate, but will only receive the full amount if you have paid sufficient years of NI contributions.

Crikeyalmighty · 06/06/2024 10:36

@SeatonCarew yep, it's important to realise that when you read about older pensioners who can't manage and don't get private pensions. Some will get a top up on pension credit - but not all

Willwetalk · 07/06/2024 22:22

saraclara · 04/06/2024 23:22

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.

If my dad sold his house and moved to a one bed flat, he'd have quarter of a million in the bank.

beanii · 07/06/2024 22:28

They need to sell up and downsize.

Then carefully manage what's left.

Devon23 · 07/06/2024 22:30

Could be looked at as deprivation of assets if either parent needs care.

SolOlly · 07/06/2024 22:42

They could consider applying for pension credit if they’re only on state pensions and don’t have savings … I’d look into this as it may give their income a top up and then I would get advice from agencies that provide debt management and budgeting support

Welshmonster · 07/06/2024 23:57

get proper financial advice. do not make yourself worse off by them owing you money as well. also check out power of attorney while they are still capable. and see how to protect themselves from expensive care home fees

saraclara · 08/06/2024 00:57

Devon23 · 07/06/2024 22:30

Could be looked at as deprivation of assets if either parent needs care.

OP states that they're fit and healthy. Deprivation of assets is only considered if a person gives away substantial amounts after they are diagnosed with an issue that makes it clear that they will need care in the future.

Anyway, they're not giving anything away, they'd just be creating liquid funds that they need to live on.

Libraview · 08/06/2024 02:48

One of the few instances equity release is maybe a good option although the amount of debt is not mentioned it would be the least invasive for their dignity and your relationship.