Parents offered us chance to buy their property,is it worthwhile?

Swallocks1

Not sure if this is feasible or not (or even the legal technicalities of it) but couldn't your OH's parents sell the house to you for the market value. You get a buy-to-let mortgage then offer them a lifetime protected tenancy agreement, whereby they pay you rent (which I believe you can set at whatever level you see fit) and they have a guaranteed roof over their heads until both of them die and you get a foot on the property ladder.

Would be interesting to see what other MSEr's have to say as this is something that I have discussed with my parents in the past.

martinpike

Swallocks1 wrote:

whereby they pay you rent (which I believe you can set at whatever level you see fit)

I'm no expert, but I'm very confident this has to be set at a 'reasonable' level for tax purposes.

leonie_2

Besides they want to do the deal exactly like the professional firm has offered them so no one can say they got a 'deal' (he has other brothers and sisters who arent interested in buying it)

martinpike

I was reading my Which? magazine on the train this morning, and they reported that "More than 70% of financial advisers gave bad advice to customers about equity release schemes in mystery shopping carried out by the regulator for the Financial Services Authority (FSA)".

They recommend obtaining the FSA's equity release scheme factsheet at https://www.fsa.gov.uk

margaretclare

Judi wrote:

I personally wouldnt do it. Business and family very often doesn't mix and i say that from bitter experience.

I agree with you, Judi!

I could tell some hair-raising tales about what happened in my family...

Depends why the parents want it done this way - a lump sum plus a monthly payment? If they did equity release with e.g. Northern Rock they would probably get a lump sum which they could invest for income, they wouldn't get a monthly payment.

Some of these 'within family' schemes sound good on the surface, but they can rightly be seen as scams by the Revenue & Customs Dept.

Things to think about are:

1. Where are the parents going to be living after this is done?

2. If they're still planning to live in the house then you have a mortgage of your own plus a BTL mortgage. Can you afford this?

3. If the parents are still living in the house - as others have said - then you have to charge them an economic rent, whatever that is in the area. That rent has to appear as income on your tax return. But they don't want that - they want a monthly income FROM you, not paying rent TO you.

4. As it's not your main residence then if they die and you sell it, you get charged CGT on the proceeds, which doesn't apply if it's your main or sole residence (forget what the correct term is, but it means 'your home where you live as opposed to somewhere that you're renting out for profit)

Best wishes

Aunty Margaret

leonie_2

Well the reason they want a lump sum plus a monthly amount is that they would get more. The company only offered them £31000 as a lump sum but if they have it split over ten years it works out that they get £39000.

Yes they would continue to live in the property and maintain it. When they both die, we would own the house and sell it on for the actual market value which should be considerably higher than the company valued it at originally. The difference being that if we bought it the money would go to their son rather than a company.