Buy Grandparents' House, Feuding Kids?!

xylophone

The proceeds of sale of your mother's current property together with money from you would permit the purchase of the new house outright?

If you are happy to tie up your savings for an indeterminate period, you could lend your mother the money  against a first a first charge on the property.

You could make it interest free but inflation will chip away the purchasing power of your money so that you would be out of pocket at redemption/

You could charge interest and agree to "roll it up" or you could agree that when the property comes to be sold, you will receive a quarter of the value of the property at that point.

Be aware of the income tax/CGT implications as appropriate.

And make sure that a solicitor draws up a legally binding agreement and registers the charge.

theoretica

You seem against equity release - why? 

Yes an equity release product will have interest charges which will reduce inheritance for their children - but your suggestions of paying rent or lending them money as a private mortgage will also do this.  I think it would be simpler and cleaner for them to go to a commercial company for this, and you to find your investment property elsewhere.

You also mention their children not having the stress of selling the family home - your grandparents don't need to appoint them as executors, they could appoint you, with clear instructions that you are to employ a solicitor to do as much of the work as you choose and the home is to be sold and the money split. 

dawnybabes

xylophone said:

The proceeds of sale of your mother's current property together with money from you would permit the purchase of the new house outright?

If you are happy to tie up your savings for an indeterminate period, you could lend your mother the money  against a first a first charge on the property.

You could make it interest free but inflation will chip away the purchasing power of your money so that you would be out of pocket at redemption/

You could charge interest and agree to "roll it up" or you could agree that when the property comes to be sold, you will receive a quarter of the value of the property at that point.

Be aware of the income tax/CGT implications as appropriate.

And make sure that a solicitor draws up a legally binding agreement and registers the charge.

xylophone said:

The proceeds of sale of your mother's current property together with money from you would permit the purchase of the new house outright?

If you are happy to tie up your savings for an indeterminate period, you could lend your mother the money  against a first a first charge on the property.

You could make it interest free but inflation will chip away the purchasing power of your money so that you would be out of pocket at redemption/

You could charge interest and agree to "roll it up" or you could agree that when the property comes to be sold, you will receive a quarter of the value of the property at that point.

Be aware of the income tax/CGT implications as appropriate.

And make sure that a solicitor draws up a legally binding agreement and registers the charge.

Yes, we would buy the house outright.  If it happens I’d take the 1/4 value of the house at sale (so hopefully with profit). Mum would do all maintenance etc.  Yes we would be taking legal advice to make sure we’d ticked all the boxes.  It’s not set in stone yet.  

hb2

I think it sounds as if the OP has dropped the idea of buying the house and renting back to the grandparents but, just in case they are still considering it, they should know that this is illegal in the UK. It used to be allowed as long as the buyer was strictly regulated by the FCA but even this is no longer allowed.

MobileSaver

Pennylane said:

Often elderly people say they do not want to move from their house because they haven’t seen what is available.

+1 to this.

When I first made a few quid I offered to buy a nice house for my parents. My father was instantly dismissive ("we're perfectly happy with where we are thank you") and initially refused to discuss it any further.

However, once I showed him particulars of the sort of property I had in mind (rural property with stunning views, plenty of land for his "The Good Life" self-sufficiency dream etc.) he completely changed his mind and my parents were off viewing properties the very next day!

I know the OP said moving was 100% no but it may just be worth printing out a few particulars of properties that may be more suitable for them just to let them know there are other options available.

Pollycat

Mojisola said:

JSR21 said:

I’m one of many grandchildren but I’m the only one with ‘that relationship’ with my grandparents and I also live closest to them, so naturally much of the care falls on our shoulders.  This is fine by me.  My grandparents had two children, one is my parent, the other my aunt/uncle 

Neither of their children have the will and/or means to buy the house from them and they both hate each other.

While they are thinking of their future, discuss setting up Power of Attorney as well.

It could be a nightmare if this isn't done and they have two warring children arguing over major decisions about their welfare.

I'm glad someone has mentioned this - and I'm not surprised it was you ).

I picked up on something the OP posted in the first post:

JSR21 said:

Do I ask for power of attorney to make sure my rent gets paid in the event of my grandparents’ incapacitation?  

That's not how PoA works.

Read up about it on GOV.UK.

It's worth your grandparents considering doing it.

TBagpuss

JSR21 said:

OK so some great comments, thanks so much.

Some clarity needed from me I think.

• Moving – absolutely 100% not an option.  They’ve been in the house 60 years and it’s their home.  We’re not prepared to convince them otherwise.  Their home is close enough to us and we’re OK with what’s to come, as hard as it’s going to be.

• Charge on the house – Good suggestion, and I don’t want to profit from my grandparents, but lending them the money interest free would prevent us investing it, so in effect it’s a hefty cost to us.  If I was really ruthless I could see it as me buying a kitchen and bathroom for their children, not them.  Doesn’t seem right somehow.

• Value of sale – Yes, market value, at least three independent, documented valuations etc.  I’m not looking for a tax scam.

• ‘Absolute money pit’ – Not sure from my vague description how that can be determined.  Whilst it is a bit of a ‘fixer upper’, it’s pretty sound.  Matter of opinion I guess.

• The kitchen, bathroom, windows etc – this is what set my grandparents off.  They’re absolutely adamant they don’t want to move.  The home was and still is a family hub, and the home improvements are what they want, not us or anyone else.  How that would fit in if we bought the house I don’t know.  Maybe the fair market price would be below average due to property condition, giving us wriggle room to invest in a bit of a refurb?  I’ve no idea, that’s partly why I’m here.

• Inserting ourselves between the feuding children – completely agree, it could cause problems.  However, I’ve always been in the middle of the feud so it’s nothing new.  Ultimately, if their children aren’t prepared/able to do the same, my grandparents will just do ER and everyone will lose out?  The will would be made to split the remaining cash between them, no property to fight over.  We either rent out or sell the property when they’re no longer with us.

My relationship with my grandparents is a direct result of my parents not being there for me – my grandparents brought me up beautifully and for that I owe them so much.  If this is a bad idea then fine – I’ll just invest in something else.  I’m just looking for the best option for them, not me.  Early days, my OP was our first thoughts on the matter and we’re open to alternatives.  There just has to be a better way for them than ER or moving.

The family politics are impossible to judge when you’re on the outside looking in.  Who I’m likely to fall out with is my problem I guess; I’m just looking for a mechanism that would work and is best for everyone, with as little risk as possible for me (something else I’d have to evaluate myself).  If this isn’t the answer, fine.  Open to further suggestions, though I'm starting to wonder if I'm asking the golden question - if it was that easy, everyone would do it.

Thanks again.

You could loan them the money on the basis of a charge back with the charge either being for a fixed lump sum + interest, or for a fixed % of the house value (e.g. if the house is worth £300K, and you loan then £150K, you could set up the charge as £150K + interest of x% p.a., or as a charge for a lump sum equal to 50% of the value of the house at the date it is sold / the charge is cleared. Either of these manes that you are investing - it's not an interest free loan, but in neither case do your grandparents have to pay anything straight away.

AS long as the loan is properly drawn up with both you and your grandparents getting independent legal advice, then it should be possible to do it in a way which will be legally valid. You'd be a secured creditor so, like nay other mortgage lender, would get paid first on any sale of the house.

If you were to buy the house, you'd probably need to to get a proper, formal valuation from a surveyor first, then buy the property at that open market value. As you would then be the landlord it would be for you to pay for the improvements, which would presumably enhance the value of your investment. Alternatively, you could lend your grandparents the funds for them to do the upgrade, then either you get the house valued with the upgrades done, you buy it at the new open market value, and your grandparents use some of the money you've paid them to pay back the original loan, and then they either pay you rent, or you agree that they live there rent free and see the property as a longer term investment,. 
If you buy them out then they will have substantial capital which would affect their eligibility for pension credit or other benefits, f that is a consideration. If you loan them money to improve the house, and secure that debt by way of a charge over the property, then they should not lose out as the value of their home wouldn't normally be taken into account for benefits entitlement. Any claim on the value of the house for care home fees, should that situation arise, would  be subject to your secured loan, just as it would to any other form of mortgage or pre-existing secured loan. 

Malthusian

JSR21 said:

My thoughts exactly; the grandparents came to me because they know I'll do right by them, unlike their own offspring.

Came here rather than going to an adviser to start with as they're all trying to sell their mates products to earn their commission... They're not looking at my grandparents' best interests, they're looking at their own.  I at least needed some indication of where to go so I could sniff out the BS.

They should see an Independent Financial Adviser. They will be obliged to select the most suitable solution from the whole of the market and won't be recommending their "mates".

If they don't want the cost of advice to be paid via the interest charged on the loan (i.e. commission), they can ask the adviser to quote a fixed fee or hourly rate to be paid up front.

xylophone

They should see an Independent Financial Adviser. 

You could loan them the money

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