Q:

Purchasing a house with parent-in-law's money, temporarily

Say I am about to purchase a £200,000 house (moving house, rather than first-time buyer), and can get a mortgage for the £120,000 difference I need. But, my parents-in-law have offered to loan us the £120,000 at 0% interest instead; and we would pay them back the same amount each month that we would have paid for the mortgage.
The catch, however, is that at some point in the future they are likely to need the money back, although the timescales are not yet known - in which case we would have to take out a mortgage on the house at that point for the remaining value of the loan, in order to pay them back in a lump sum.
What are the legal issues and risks with this approach - how should we make sure everyone is fairly covered? Is there any tax implications? Is there an easier way to approach this? Would we be less likely to get a mortgage in the future because the money would be being used to pay off this loan? Is there anything else I need to know before agreeing to this?

A:

I would proceed with caution and a lot of it depends upon the character of all parties involved.  If the opportunity came along to open a joint venture with these people would you do so?  Because basically that is what you are doing.  Is anyone over emotional and liable to fly off the handle about money despite the facts?  Are you able to keep accurate records and record the details of each transaction?  This would include backing up bank statements so if the facts were disputed they could be provided as evidence.  Are you willing to make payments like clockwork?
If there is one shred of doubt, pass on this generous offer.  The money you save will not be worth it.  However it could work and does for some people that I know.
If you would want proceed I would draw up a draft agreement.  You may want to include a provision that they could not call the loan until 2 years after purchase or some other period of time.  You may ask that they give you 90 days notice.  What happens if a payment is late?  How will the payments be tracked? Every contingency you can think of should be covered as if you do not trust these people or yourself.  The goal is that there are no assumptions that everything is discussed beforehand.
Then go see a lawyer and you would pay for that lawyer.  They can make the agreement all legal and the cost will certainly be less than a couple of months of interest.
I would say a key component of all of this is when they can call the loan.  If they won't agree to a couple of years limitation then it would be a pass for me.

