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It’s a bad move for people who don’t know what they’re getting in to. If your in-laws understand that they won’t be able to leave the property to their heirs without the heirs having to pay whatever they’ve taken out on the loan, it’s fine. It’s not a scam but the borrowers need to understand what it is
Subject Expert
Remember they are your in laws, not you. Your influence is limited.
It's likely a horrible idea, but telling them that outright may turn them off and reduce your ability to help.
You may have more success with a message like "wow, I would be really careful to read and understand the rules of a product like that, and reflect on the interest rates, before seriously considering doing it" rather than what you and I are both thinking, which is "AAAAAAAAAHHHHHHH!"
Mentor
Or say “Just burn your daughter’s inheritance you heartless people!!”
Or maybe don’t say that.
It also has high rates so be careful
Mentor
It’s not the worst idea.
But the rates are quite high at 7.5%-8%. They will end up paying a lot of interest over the rest of their lives, of perhaps 30+ years. So they might be able to access approx 25% of their home value but then “lose” 75%+ when they die. Presumably they might be able to pay down some of the mortgage when they sell the holiday home.
If they understand how the math works, and are happy with it then go for it.
However, I would explore all other opportunities. Renting, traditional mortgage, timeshare, first. Perhaps you could buy it using a traditional mortgage and rent it to them at market rate?
If none of those work then probably go for it.
Truly YOLO. It’s their money, if it makes them happy do it.