Thinking of buying my parents' house from them - anyone any experience of this?

[oldnewmummy]

Not sure if this is the right board, but I thought that some of the people who read this section may have knowledge of the issues.

My parents are cash poor and so DH and I are looking into buying their house as an investment (we live overseas and have no UK property), possibly on our own or possibly jointly with my sister and her husband.

One option is to buy at full market value and charge rent, another to buy at discount and charge no rent. We're not trying to profit from them but can't afford to lose money. But at least if we buy it from them an equity lease scheme will not be making money from them!

Does anyone have any experience of this?

(We're seeing a tax adviser next week).

Any ideas (roughly) what % an equity release company would give them, and what impact it would have on their eligibility for nursing home etc in future.

Thanks in advance

dont know about equity release but we bought my dh's aunts house off her at a reduced price and she went into sheltered accomadation with 50 g in her pocket pls whateva savings she already had.

so now she pays 50 quid a week rent to the council gets free concil tax i think and coz its an upstairs flat she hardly ever has her heating on lol

best thing she ever did and it got us on the ladder

my step mum cared for an old dear and she had to pay her way with 23k in the bank at a nursing home and even had to pay when she was in hospital for three months which i think is terrible and was in the process of selling her house when she passed away

Equity release schemes are a rip off in my opinion. I looked over these for my parents once and was astonished at the poor value offered.

I would recommend buying the house

The other alternative is for them to seek out an interest only mortgage (without life assurance obviously) - my parents got one of these through a broker even though they had no income (not sure how, but it wasn't difficult from what I gather). The loan just becomes repayable when they die The disadvantage would be that the house remains in their posession for tax purposes and might have to be sold to fund nursing care when they get older.

If you do buy it from them, it needs to be at full market value, and they need to then pay a full market rent to you, otherwise it will not be deemed to be a 'market-value' transaction and this can cause certain problems for you (if for example they needed to move into a nursing home, or if they died within 7 years ). What you do with the regular rental income is of course up to you (but if you do give it back to them, you need to - ahem - be subtle about it...). There isn't really any benefit that I can see to recommend buying at below value (especially if you never live in the property so cannot then claim it to be your main home - you could get a higher CGT liability).

If you are going to pay say 200k for the house and the plan is for your parents a to 'gift you' say £150k to help pay for it (leaving them with 50k cash released) then you need to be subtle about how you process the cash flow, as this could be deemed to be a transfer designed with tax avoidance in mind. Maybe you should take out a flxible mortgage for a short period, then pay it off with any 'windfalls' you might - ahem - unexpectedly receive.

If you can't afford to cover whatever equity amount that you are releasing then go for a long-term interest only mortgage as this will offer the cheapest repayment costs.

Anyway, your tax advisor will explain in full the stuff I've referred to here. If not come back with any other questions...