Helping parents buy house

oaks321

Hi all,
I've read some similar threads and I've seen some great advice, I want to share our situation and see if there's anything you collectively think I'm missing.
My in-laws will be retiring within the next year, they are mortgage free, living a "two up two down" in a cheaper area of the country. They would like to buy a bungalow to help as they get older, and would like to be closer to family (not just us, lots of family around our area). However, property prices are a bit more expensive around here.

My wife and I would like to help make up the shortfall between what they sell their house for, and a bungalow nearer us/other family. This is likely to be between £40-£50k, approx. 20-25% of the purchase price.

Our current plan:
 - remortgage our house to release equity to get the money (can't see an issue here, would still end up beneath 75% LTV on existing house, and well within affordability)
 - help support the purchase of new bungalow for in-laws (would be purchased on open market, so no issues in later proving we paid market value). I'm not sure how SDLT works in this situation as I assume it would be classed as a second property for my wife and I?
 - Not charge in-laws rent, but to own the percentage of the house we helped buy (as above, likely 20-25%) - This is where I'm not clear on the legal approach to achieve this?
 - Our % of their house becomes a long term investment, to be repaid upon their deaths (hopefully at least 20 years or so away). I understand this could have CGT implications
 - Their % of the house is theirs to write into their wills however they see fit
 - If both my wife and I were to die before them, we've got life insurance that would clear all the mortgage on our current property (including the £40-50k remortgage). I would then like our percentage of in-laws house to be passed to our two children.

Obviously, all necessary agreements would be done through a solicitor, my wife and I will also get the steer from our IFA before we do this, but I wanted to see what the internet thought of the plan first... The other area I'm not certain of is what should happen if one or both of my in-laws needed to go into care, I would assume our % of the house wouldn't be seen as their asset? So if they did have to sell the house to pay for care, we would get our investment returned at that point?

Thanks in advance.

foxy-stoat

Yeah, lend them the money and put a charge on the property, get a loan agreement drawn up stating how much you will be lending, purchase price and how much you want if they have to sell, money or percentage of the property value.

Good luck with it all.

MovingForwards

Private mortgage, drawn up by a solicitor, it's registered on the title deeds like a normal mortgage. You all decide the terms.

Repaid on the death / move to a home on the second one of the in-laws.

Your loan to them is not subject to 2nd home STLT, nor CGT as you do not own any part of their home.

xylophone

 It would save complications if you simply lent them the money against a  first charge on the property- a solicitor will draft the agreement.

Be aware that if you agree that interest is to be rolled up and paid on redemption, you will have an income tax bill - if you agree a percentage of the property price to be paid on redemption you could end up with a CGT bill.

In the above scenario, the property is wholly legally and beneficially owned by the  in laws.

With regard to whether they own it as  joint tenants or tenants in common, either way, should  just one of them need to go into care leaving the other in the house, the property would be disregarded in the means test.

Should both have to go into care, then the property would be taken into account - presumably it would be sold and your loan redeemed according to the original loan agreement.

If they own as T-i-C, then each can leave his/her beneficial interest to another party (presumably in this case their offspring), with an interest in possession to the spouse.

As a care fees mitigation measure, obviously this only works in the situation where one predeceases the other before the widow/er needs to go into care.

getmore4less

As per HMRC if you get a % of the property you have had a beneficial interest

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg70230

oaks321

Thanks everyone for the replies, private mortgage seems the way to go, even with CGT implications further down the road (no issues in paying tax that's legitimately due...)