PIL want us to buy their house

[Gogodonu]

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

This. I thought the same. 100% do not buy their house. They can’t afford it and it may lead to family tensions

@Gogodonu There are life insurance products available that allow people to draw down the equity now, and live in the house until they die, after which property goes to insurance company. This might be a good option here.

If their house is worth 220k is there anything they can downsize to? My daughter's looking for a first home and can't find anything under that.

Are they claiming Pension Credit?
if they aren’t and if they are eligible, it will increase their income. Gov website has info. Also Age Uk, Citizens advice might be able to help.

They are both retired and have no mortgage. They both get the state pension. If their house is worth £220K I take it this is up north or somewhere not that expensive? You wouldn’t find a house for 220K in the SE. Do they get the full state pension each of £11,502? If so, that is 23K for 2 elderly people and they wont even pay tax on that.

If all that is correct, even with no private pension on top, that is not that bad. How many families have 23K a year left over after housing? Not many.

That aside, what are their debts? What type of debt is it, and how much? There are things that need to be paid, or you are in deep sh!t, like council tax, TV license and a couple of other things if I remember correctly. Otherwise, they need to go talk to the CAB or other debt charity and have their debts looked at.

Aside from those debts that are a priority (the ones that send round the debt collectors, see above list) you can get some advice and help with the others. The CAB or charity, can contact the companies and talk to them and get a repayment scheme set up. Your relatives could arrange to pay a set amount a month. I have seen people pay £1 a month, as a gesture of good will. I have also seen companies make offers to be repaid by discounting the amount owed. All this info can come through talking with a debt counsellor at one of these charities. I know that these people are super busy now with the way things are in the country, and if possible I would actually get your DH or yourself to write to the companies and explain and see if you could arrange reduced payments.

One thing is for certain though is THIS IS NOT YOUR DEBT and there is no way I would be compromising my own family finances to bail someone else out.

Have they thought about an Independent Voluntary arrangement? We had this years ago and all debt was broken down into a neat monthly payment for 5 years and then it was cleared

That's what Debt Management companies do eg Step Change. They work with the Creditors to agree monthly repayments on a schedule until the debt is cleared.

Not all Creditors agree to it (they don't have to, but often agree to because it's the only way they'll get their money back even if it takes a lot longer)

The OP shouldn't have to become a debt management company for their PIL!

https://www.stepchange.org/debt-info/pay-off-or-reduce-debt/debt-management-companies.aspx

A 200k mortgage over 10 years would be 2k pcm. If you bought it they would then spend all their money on rent; they might live to 100 so this is a terrible plan- unless you can afford the 2k pcm & actually want their house & want to support them financially in their older years.

I work in the equity release industry and it’s not the con every seems to think it is. It’s so highly regulated and your in-laws would speak to a solicitor to check they completely understand the terms. If they went for a lifetime mortgage they could borrow the amount to pay off their debts and pay off the interest, which is essentially what they would propose if you took over the mortgage. They would always own their own home and they can ring fence a proportion of it to pay for future care needs. They need to speak to an IFA about the best options for them.

Many people think of equity release as the 80s scandal where people lost their own homes. In fact, because of that it’s one of the safest financial options as it is so highly regulated and we have to prove to compliance that it’s absolutely the best solution for the client and if not why not

Don't do it.
YOU WILL BE LIABLE FOR THE MORTGAGE 'DEBT.'

Not if there’s no suggestion that the person will need care at the time the move is made.

Mn posters are OBSESSED with deprivation of assets-you’re allowed to have a life you know!

I wouldn’t do equity lease if you can get the debt to a manageable level to be paid back nor if you could get it written off. I don’t think they are allowed to go after your home, so I wouldn’t remortgage it or release equity.

Also, if your PIL are not good with money, I wouldn’t recommend them releasing a lump sum to themselves.

What are the debts?

Equality release is a terrible idea. It’s a very expensive way of accessing money. They’re relatively young - it will roll up very quickly.

They need to sell and downsize. If you can afford to buy and pay your own mortgage ok, otherwise they sell to someone else.

@PoeticLicense6 yep

I would loan them the money, with secured on the property so you get your money back (perhaps a %) when they die.

There's not a chance in hell I would buy their house. I'd help them practically to sell it and downsize, but I would not be getting involved financially with people who can't manage their money. Even if they were my parents. They're adults, they need to take responsibility for their behaviour and change it, so they can live within their means. You enabling them to continue to ignore their financial situation, will not ultimately help them. Help them work out a budget, but don't get involved with their mess.

I'd only do it if the property makes sense for your family as a BTL - as this is basically the type of investment you will be making. You'll have to be be prepared to deal with your parents as tenants.

Dealing with parents as tenants would be incredibly difficult if they don't pay their rent. It would be way way way more difficult than dealing with tenants that you're not related to.

I posted this on 5th June :-

Unlikely they'd be able to afford any repayments, unless they change their current lifestyle.

On death, if OP is the sole heir (seems likely), her loan would effectively be lost as it would be deducted from the estate to be repaid to her, then she receives the balance !

That is not true, there is no time limit for the consideration of deprivation of assets, and it does not start from diagnosis of an issue. The assessor will consider whether it could be reasonably foreseen that you world need care, and once you get to pension age then future care needs are a consideration for anyone and everyone.

Can you afford it? My brother bought his pil house and they just continue living there and of course will do until they die. They have the cash to be able to live comfortably in old age and he has the asset of the house. He bought it outright though so no mortgage. I think if you can afford to buy it as an investment it makes sense for everyone involved

One thing comes up on these threads which is the cost of downsizing, if you move somewhere with one less bedroom. If you properly downsize this is less of an issue- why can't they move to a two or one bed flat, in an over 55's place, to shore up their future, these places are heavily discounted by our council for example, and there are lots of offers for up to 40% less on houses due to their age. They might also have

The biggest problem is that people want to stay living in whole houses, but that might just not be possible, you don't need a three bed detached bungalow, and if you do, you have to pay for it! There are lots of great retirement communities a lot cheaper.

Friends of ours bought a share in their mother's house. Their mother didn't have debts but the house needed work done on it, and she couldn't afford it. Each of her three children chipped in £15,000, and she transferred a quarter share of the house to her three children jointly.

That gave the mother £45,000 for a new boiler and upgraded central heating and to redo her bathroom into a shower room, as she was finding the bath difficult. She got a couple of new carpets to replace worn out ones. I think something else was upgraded, too.

It worked for them, partially because each child could afford to chip in £15,000, and they were reassured that their mother's house was safer and more comfortable for her. And it was an investment, rather than a gift. They'll get their money back when their mother dies / goes into care and the house is eventually sold.

Can’t believe some of the comments accusing the PIL’s of getting into issues by spending extravagantly. The poster says it is due to cost of living issues! They are living off the state pension! Food has risen by 20% and energy bills are insane!

Then the concerns about the impact an equity release will have on inheritance!

I really hope they come to a solution that enables them to feed themselves, heat their home and enjoy their retirement without having too many concerns about money.

The OPs parents have money, in their home. To be blunt, they have a paid for house, but didn't save anything for retirement. They did put themselves in this position. Maybe they couldn't save for retirement because they didn't earn enough, we can all sympathise with that. But they bought a house instead, so if they couldn't afford to do both, they bought too much house. They can sell their house to help fund their retirement, they were always going to need to if they didn't save. There's zero reason why they can't move into a cheap flat for retirees, as has been suggested, they're often very very affordable. The OP doesn't need to help them financially, they'll be fine if they free up equity and adjust their expenditure.