PIL want us to buy their house

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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

@Threesacrow presumably if a house is £220 in the are that they are in, they can buy a cheaper house or a flat in that area.

Because you can't do it in your area, is not relevant.

@Threesacrow as an example.

If you were to buy the house and then they pay the mortgage they would be paying twice for their house, that makes no financial sense. What are the debts that they have is there not a way to help with clearing them (providing you want to and are in a position to help)

Take into account moving costs and actually there's not much left.

Downsizing isn't an option.selling and renting probably isn't either though. Have you seen rent prices recently?

Its quite legal if you want to do it,

so long as it is sold to you at a reasonable market valve there is no deprivation of assets.

If it is sold to you it won't count in any way for IHT, however I would charge them market rent as that removes any issues of beneficial interest and legally draws the money paid slowly back without deprivation

You would be liable to CGT on selling, unless you yourselves resided there as your primary residence for a year and a day.

So every family should do this to avoid paying care home fees?

You couldn't charge them market rent as they don't have enough money anyway and they don't currently pay a mortgage. They won't be able to afford £1000 or £800 extra a month.

You would be liable to CGT on selling, unless you yourselves resided there as your primary residence for a year and a day.

Primary residence relief only applies if you've lived in it as your main residence for the whole time you own it.

Surely the PILs will have the proceeds from the sale of their house and they will be feeding that back in the form of rent?
So really it's a way of giving your house to your children by the back door to avoid paying care fees and inheritance tax?

Never enter into a business arrangement with a family member concerning their home. Especially if they have a track record of poor financial management.

What would you do if they faulted on mortgage payments ? It would be your financial reputation on the block and could scupper lots of things for you and your family.

They have 3 options
downsize
equity release
get more income, ie get a job

Yes there are pros and cons for each, but there are pros and cons for doing nothing and at least they are trying to find a solution for their financial situation.
Suggest they see a financial adviser, but do not take on a mortgage on their behalf.

It doesn't avoid it, because the daughter has to pay fair market value, so they have £220K in cash - if they spend that before care is needed, then it's gone, same as it would be if they sold the house to a stranger.

It would only be an issue if they sold the house for way less than its worth, that could be investigated both for deprivation of assets and IHT (as it could therefore be considered a partial gift with reservation of benefit)

Yes, but it's perfectly above board, the children would have to declare the rent on self assessment and pay tax on it.

Its not really beneficial to the DCs as they still have to part with £220K, its not money for nothing.

There is nothing wrong with prudent financial and tax planning - however, it is not without risk to the parents, by selling their asset to release equity they risk being homeless if DCs fall out with them or get divorced and have to split their estate and also risk less choice in care if they don't have enough cash left to cover it.

I don't understand the comments about being unable to downsize because their house isn't worth much. Yes, if they live somewhere where average house prices are £500k, looking to spend less than £200k on a flat isn't going to happen very easily. But they evidently live in a cheap part of the country, where houses like theirs are valued at £220k. Therefore one bed flats will be cheaper too. In the same area, one bed flats are always cheaper than houses. Yes they might not be able to afford a flat in a new, luxurious retirement complex, but they'll be able to afford something. Imagine they live in this house in Leeds, on the market at £230k:
https://www.rightmove.co.uk/properties/145742858?utmcampaign=property-details&utmcontent=buying&utmmedium=sharing&utmsource=copytoclipboard#/&channel=RES_BUY

This one bedroom flat, in really quite a nice part of Leeds, is only £60k:
https://www.rightmove.co.uk/properties/141503471?utmcampaign=property-details&utmcontent=buying&utmmedium=sharing&utmsource=copytoclipboard#/&channel=RES_BUY

Stamps duty isn't paid on properties less than £250k, so even with fees, they'd have a chunk of money to chuck at their debt, and use for living expenses. Yes there might be service charges, but so what, they've got at least £150k in cash to spend on those costs.

They might not want to live in a one bedroom flat if they're used to a house, but they won't be homeless, and it's what they can afford. It's noone else's responsibility to keep them in a lifestyle that they cannot afford.

Although to be fair, I don't have an issue at all with equity release too. But there's really no need for the OP and her husband to make the risky, complex decision to become the the PILs landlords.

That would appear to be the bottom line here @Hayliebells the PIL don't want to take a hit/ suffer a loss of status so they are hoping that the op can be persuaded to go without cake so that they can have their cake and eat it.
In her shoes I think I would make sympathetic noises but say: sorry no, what you want is not possible or feasible for us.

"Here"?
There are cheaper areas and in London you can 100% buy retirement flat for way below 220k lol.
There is no reason to live in a big house if you are only on state pension is it?
And as I said, they can always take lodgers on.
It is unreasonable to live like they do.

How much is their debt? Could you pay that off? If they only have their state pension then other benefits might be available that you could help them access. I think the equity release/you purchasing the house are both non-starters. There will be costs involved and scenarios you/they haven't thought of. Downsizing is hard, leaving friends and packing up a life time of memories and belongings when you don't want to, if this can be avoided then so much the better. I'm sure you will want to do the best for them but I don't think involving the house is it.

Depends where they are, I have an inherited property let out, value £250K rent is £400 PCM, and that's fair for the area.

Assuming the OP doesn't live near Corby - assuming PILs live and know a more expensive area - you think it's OK to send them somewhere away from the family and their friends so that they can buy something really cheap? How about Rwanda?

If you buy the house - it will be a second home. You will be treated as a second home owner for council tax, stamp duty etc. And if you try to sell your own home it will complicate issues. In addition if they can’t keep up payments it’s your responsibility as the mortgagee.

You couldn't charge them market rent as they don't have enough money anyway and they don't currently pay a mortgage. They won't be able to afford £1000 or £800 extra a month.

They will have the money from the sale, 220K to pay rent with.

OP has only posted once, no mention of locality, number of bedrooms, size of house, value relative to region. So much speculation. Not enough info.