MONEY MORAL DILEMMA: Should you still help your kids get on the housing ladder?

beingjdc

Two different things.

1) You've promised the money, so if they want it, I say give it to them.

BUT

2) Being a guarantor? No way. Renting is cheaper than buying, so if they can't afford to save up any kind of deposit renting, they're really going to struggle on a mortgage. Add into that they are dead certain to be in negative equity for a few years at least, and you're putting your own security on the line.

beingjdc

siber wrote: »

With the way the housing market is at the moment, I was able to contact the seller and shave £17,500 off the value of £115k (a full 15% discount!).

The value of something is what someone will pay for it. You may have shaved 17.5k off the asking price, but the value is whatever you, as the highest bidder, actually paid.

MiserlyMartin

schoolfundraiser wrote: »

But bear in mind that all this doom and gloom about a fall in house prices needs to be put in context. A 1% fall on a £200K house is £2K. Big deal.

That sounds like an awfully big deal to me! Can you afford to lose 2K a month? I can't! The other month it was a 5K loss on your 200k house(a 2.5% drop)
Now has never been a better time not to buy. Anyway this will all be the least of our worries once this recession has really kicked in. Some are saying this could be a depression.

stars_bright

I wouldn't have made the promise in the first place. When I and my then fiancee bought our first house 26 years ago we would not have dreamt of asking our parents to either lend or give us any money towards it. It was very difficult for us to get a mortgage - we finally managed to get a loan for 3 times my fiancees salary but they would not count mine at all. We had to make do with what we could find for the amount of money we could afford, having saved up for a deposit. The problem is that these days youngesters won't "make do" with what they can afford, they want the besy to start off with. I have 2 children, the oldest is 19 and having strugged to provide a roof over their heads and what they need up to now, there is no way I would consider funding his house purchase as well. When kids are old enough to have their own house, then they are old enough to finance it themselves

beingjdc

stars_bright wrote: »

I wouldn't have made the promise in the first place. When I and my then fiancee bought our first house 26 years ago we would not have dreamt of asking our parents to either lend or give us any money towards it. It was very difficult for us to get a mortgage - we finally managed to get a loan for 3 times my fiancees salary but they would not count mine at all. We had to make do with what we could find for the amount of money we could afford, having saved up for a deposit. The problem is that these days youngesters won't "make do" with what they can afford, they want the besy to start off with.

With all due respect, the cheapest 2-bed where I live is £155k, and that's a sixth floor flat in a 15-storey council block.

So, was your fiancee earning the equivalent of £52k, or can we all accept that properties cost more now?

just22

While not quite the same situation (I had looked at the market in my area, and knew it was a good time to buy, and also was planning on paying almost the full mortgage from renting spare rooms) my parents did put up the full deposit and go guarantor on the loan 3 years ago.

We have a verbal agreement that the loan will be repaid in full, along with a proportional share of the increase in the flats value. Given how things have risen in the last 3 years, even with my salary as a doctor when I'm finished university, I wouldn't be able to get a mortgage on a one bedroom place myself!

Provided the daughter can give some idea of how they can afford the place, and show some kind of money smarts, I'd say if the parents have the money there for it then they should do it.

tallgirld

The first thing I would ask is "Why have you ended up with a broke husband"??????

Beees

I'm 24, earning £16,500 a year. Most of my monthly income goes on rent, bills, food, council tax and fuel. I live as frugally as possible, don't go out drinking, don't go on shopping sprees and have no debts. Regardless, when the deposit for a tiny flat is about £12k, I have got no hope of saving up this kind of money without it taking years. In the meantime, I'll be paying the mortgage of my landlord, one of the many buy-to-let people who have skewed the market so people like myself will never got on the property ladder (to add insult to injury, he's a useless landlord who never makes repairs when asked).
I've asked my parents if they would consider loaning me some or all of a deposit interest-free, then at least it would be a stable debt I can pay back in instalments. They have set me the challenge of seeing how much I can save out of my monthly income to prove I would be able to make mortgage payments in future and still have some left over. I'm more than willing to do this and whatever else it takes to demonstrate I can be trusted - I just don't see the point in waiting til house prices start soaring again, which is what I'd have to do to get anywhere near a proper deposit saved on my own.
To those who say parents would be taking on an unwise investment, the threat of negative equity is only a spectre if you don't intend to stay in your house long and are just in the market to keep selling and moving on. I don't believe in buying a house for this purpose - I believe in staying in it and making it a home.
Those on this forum who accuse young people of being lazy or not knowing how to save have no idea of what it's like to be in your early 20s in this country. Many 20 somethings will have university debts as foisted on them by the Labour government; I have a friend who is £16k in debt solely from student loans, and although she is a qualified teacher, she has only been able to get supply teaching jobs which don't earn enough to allow her to start paying the loans back. In the meantime, the interest piles up. How the hell is she supposed to save up a £12k deposit out of nowhere? I agree that showing some ability to be financially disciplined and save up is no bad thing. But in the current climate, we are all feeling the pinch, and those of us at the bottom of the pile need the most help. We are discriminated against for decent jobs ('not enough experience' 'too qualified' 'older staff won't like having a younger person in a more senior position to them'), given dire salaries or told the only way to up our employability is to embark on unpaid internships (WHO can afford to work unpaid?), expected to foot the bill for everyone in this country who could work but refuses to, and forced to rent from amoral landlords. Oh, and did I mention we're constantly reminded there will be no state pension for us when we got old? And don't even get me started on my £200 NHS dentist bill a couple of months ago.

Try living for a few months on my salary, see how much you would actually be able save - if anything - work out how long it would take you to save up a deposit, and then shut the hell up about young people not knowing how to budget.

JimmyTheWig

A very powerful post, Bees, thank you.
I think you have hit the nail on the head a number of times.

The only comment I've got to make is about the following...

Beees wrote: »

To those who say parents would be taking on an unwise investment, the threat of negative equity is only a spectre if you don't intend to stay in your house long and are just in the market to keep selling and moving on. I don't believe in buying a house for this purpose - I believe in staying in it and making it a home.

The only thing you need to watch out for is changing circumstances. Things can change very quickly.
I bought my first place when I was 23. It was a small one-bed flat. I was single and had no plans (or real hopes!) for that to change. The flat was perfect for me. I was happy to stay there for the 5+ years required to ensure against negative equity. My plan was to pay off the mortgage as quickly as possible and stay living there until I had done so.

As it happens this was in 2000 when prices were going up very quickly indeed. I didn't want to miss out on these increases and so sold the flat to buy a house (my salary had gone up in this time, too, to afford a larger mortgage) less than 3 years later.
But my point about things changing is that I met a girl in 2002 and by February 2003 we were engaged and living together in my house, and in January 2004 we had our first baby.

I was adamant in 1999 that I would be happy to stay in that small flat for 5+ years (probably 10-15 years). But with hindsight, if prices had gone down rather than up, I don't know how the three of us would have lived there.

geri1965_2

tallgirld wrote: »

The first thing I would ask is "Why have you ended up with a broke husband"??????

Pathetic.

Women are equal to men you know, a husband is not a cash cow there to provide for you.