Buying a portion of Parents house

Cauli

Dear MSEs,

I am hoping to find a fair and efficient solution to the following situation, any input most welcome.
Situation
My wife, 2 daughters, my parents-in-law and I live in my parents-in-law’s house.
The house is currently in my p-in-l’s names.
After a long and arduous process we now have planning permission to build an extension (a granny-annexe) for the p-in-l.
The property without the extension is valued at £825K - £850K.
The annexe is estimated to cost £225K - £250K
My p-in-l’s mortgage is currently £451K
The have both recently retired, he is 70, she is 67, they have state pensions (not full) and ~£110K in shares/ISAs.
We would all like to live in the extended property for the foreseeable, as long as we can come to a suitable financial arrangement.
We would like to minimise Stamp Duty, IHT and any future care home fees.
My father-in-law would like to get rid of his mortgage, live in property for the rest of his life and ideally get paid to do so (to supplement what he expects will be a shortfall in their income).

An answer(?) and some questions
I think (hope! J) one potential answer is to be Tenants in Common – with something like a 65:35 split, where I have 65% of the property, take on the mortgage and foot the bill for the annexe build.
If all the mortgage was part of this transfer then this would be considered a gift with consideration and SDLT would be payable on the £451K mortgage.
Can my p-in-l ‘transfer’ only part of the debt? e.g. 65% or better still 44% of the debt (so less than the £250K 3% SDLC threshold)
What is the impact of my p-in-l owning a part of the property on Care Home Fees? From what I have read this doesn’t apply as long as one of them resides here but I can’t find anything about part ownership...
What are the implications of me buying some of the remaining equity from my p-in-l? (perhaps 1%/£8400 every couple of years)
What else I should be aware of or consider?
I understand that this matter needs professional advice but I would like to have a reasonable idea of what I should be asking for prior to getting legal input for both parties.

Thank you very much for reading this far J
Any help most appreciated.

TrickyDicky101

£451k is a whopping mortgage amount to support - what sources of income do your P-i-L have apart from state pension? What is you and your wife's combined income? Do you have any savings? How do you propose to fund the extension? Have you considered what impact the extension will have on future value once completed? It may not add to the value of the property depending on the circumstances, hence t could seem to be money down the drain.

BitterAndTwisted

You can't buy any of the equity in the property until the mortgage is settled. As there are so very many implications in this scheme I think you should consult a professional rather than strangers on the internet. Or perhaps take this series of questions over to the Investment part of the forum?

bris

Your PIL age is very much against them here, you won,t be able to buy into the house without a remortgage, you won't get one with the age of the PIL.
Specialist help needed by a good mortgage broker here, any offers would come from a higher risk lender, that would be very expensive but the equity may make it viable for one of the sharks out there, be very careful who you deal with.

Cauli

TrickyDicky101 wrote: »

£451k is a whopping mortgage amount to support - what sources of income do your P-i-L have apart from state pension? What is you and your wife's combined income? Do you have any savings? How do you propose to fund the extension? Have you considered what impact the extension will have on future value once completed? It may not add to the value of the property depending on the circumstances, hence t could seem to be money down the drain.

I know, whopping . The have a small personal pension and some other tiny bits.

My wife and my combined income is enough to get a mortgage of more than the £451K. We have significant savings - the reason we are here is we were 'between' properties.

The estimated valuation we have had on the completion of the extension (by someone other than the builder ) is £1.2-1.4M

Cauli

BitterAndTwisted wrote: »

You can't buy any of the equity in the property until the mortgage is settled. As there are so very many implications in this scheme I think you should consult a professional rather than strangers on the internet. Or perhaps take this series of questions over to the Investment part of the forum?

I wouldn't 'buy' the property, it would be gift - I assume the mortgage would still need to be settled.

I intend to take professional advice and will split into a series of questions for the Investment part, thanks for the pointers.

Cauli

bris wrote: »

Your PIL age is very much against them here, you won,t be able to buy into the house without a remortgage, you won't get one with the age of the PIL.
Specialist help needed by a good mortgage broker here, any offers would come from a higher risk lender, that would be very expensive but the equity may make it viable for one of the sharks out there, be very careful who you deal with.

The p-in-l lenders are ok with our details being added to the mortgage. They have a great deal (<1%) that runs to 2013.

I haven't asked about (considered!) getting a new joint mortgage - of course you are right and I expect it would come at a premium, if at all

BitterAndTwisted

So, you raise a mortgage for whatever it takes to settle the in-law's outstanding mortgage. They sign the property over to you. You evict them. No! Sorry, you then raise an additional mortgage based on having 50% equity in a property valued at double that and use those funds to finance the extension/annexe thingy. Meanwhile the in-laws pay you rent and become beholden to you and your whims until they die or you evict them.

Why don't they sell up and use the £400-odd thousands of equity to buy a place outright? You obviously have enough savings and income to buy your own property.

Cauli

Good point. This is why I am asking them to retain equity in the property so I can’t evict them in one of my evil moments J

The reason is because we all like where we are living, lovely house/plot/village. My p-in-l have lived here 40years and don’t want to move and if they do, don’t want to leave the area, all their friends are here. You wouldn’t get too much in the area with the equity they have – esp. if they need to release some to supplement their income.

The other reason is because I am under my darling wife’s thumb J She wants to be as near as possible to her parents – she see them needed an increasing level of care soon. She also thinks they need a level of ‘management’ which she feels having them next door will allow her to do.

BitterAndTwisted

Blimey. If they've lived there for 40 years why do they have such a massive mortgage?

Cauli

BitterAndTwisted wrote: »

Blimey. If they've lived there for 40 years why do they have such a massive mortgage?

Failed business & living beyond means.

Not the best a managing their money - part of the reason why my wife thinks they need a level of 'management'