Buying parents house for them to continue living in

AnotherJoe

macman wrote: »

They presumably took out a 25 year interest only mortgage in their 50's when still working? If so, I find it hard to believe that they have saved nothing at all to pay off the capital in all that time. Were you not able to assist them, what was their plan, other than selling the property and downsizing?
IHT is not an issue (at current values) if the house is their sole asset, but were you to buy the house and allow them to live in it, you would need to charge them a commercial rent, as otherwise it would be classed as a gift with reservation.

See the final paragraph of post 33. To summarise, this was a well off couple who essentially chose to spend every single penny they earned. Whether you decide they squander it or spend it wisely on £85 jeans etc, they had no savings and no thought for what was going to happen when they reached retirement. I find it very easy to believe after all there are literally hundreds of thousands of people in this predicament. Some due to not being able to make financial provision and some because they choose not to.

Lioness_Twinkletoes

bazzabear wrote: »

Because they don't want to leave the house.

Tough. They should have planned for this. I want to live in a country mansion but don't have the funds...

SmashedAvacado

You could do the loan as above, but also capitalise the interest so that rather than paying any interest to you, the sum owed increases.

Cheeky_Monkey

bazzabear wrote: »

Because they don't want to leave the house.

Maybe they should've thought of that when they recklessly took out an interest only mortgage with no intention whatsoever of repaying the capital at the end.

They've obviously spent many years paying a tiny mortgage and, rather than save, have squandered their money leaving them in exactly this position.

IMO, they should either sell and downsize or take the equity release so that they don't put you in a difficult financial position which is not of your own making.

martindow

Is there any possibility that the mortgage company would extend the term? It seems as if the parents are able to pay the monthly payments and this would solve the problem without the OP's finances being muddled together.

xylophone

The OP could lend his parents the money against a first charge on their home. A solicitor would draw up the loan agreement.


He could decide that this loan would be with interest/capital paid monthly

or interest only paid monthly

or interest deferred and rolled up

or a percentage of the property value

or increasing with a set index.

He would need to advise HMRC re interest.


If he chooses interest deferred or increase against set index, he should be aware that he could have a high tax bill in the year of receipt.

If he chooses a percentage of the property, there could be CGT considerations.

If both parents had to go into care and they were not entitled to NHS continuing care, the council would probably require that the house was sold at that point to cover fees.

AnotherJoe

Don't forget that paying CGT means you've made money. So it's not really a bad thing. It's obvious best to avoid if you can but I'll take having to pay CGT on my investments rather than losses

Computer_Beginner

AnotherJoe wrote: »

Don't forget that paying CGT means you've made money. So it's not really a bad thing. It's obvious best to avoid if you can but I'll take having to pay CGT on my investments rather than losses

I think CGT (or IHT) will be the least of the worries here.
Mixing money and family like this rarely works out well.

Youngsters are often overly optimistic about their future and tend to underestimate potential changes to their situation. The parents should know better, in my opinion.

AnotherJoe

Computer_Beginner wrote: »

I think CGT (or IHT) will be the least of the worries here.
Mixing money and family like this rarely works out well.

Youngsters are often overly optimistic about their future and tend to underestimate potential changes to their situation. The parents should know better, in my opinion.

But if they did, they wouldnt be in this position would they?

Computer_Beginner

AnotherJoe wrote: »

But if they did, they wouldnt be in this position would they?

I mean the parents shouldn't be asking their offspring for money. Not for this. They've got money, compared to others in this country. I would have to be starving to ask my son for money. But then I've never given him a penny without him earning it. He knows what I'm like.