buying a house with son-any pitfalls?

grumpy-old-woman_2

I have been lurking for some time but this is my first post and I am a little nervous so please be nice!!!

Due to a family death I have been left an amount of money. Its not enough to buy a house but if I get a small mortgae of say 20-40k I may be able to buy a small property which I intend to rent out. I already have a possible tennant in mind but that neither here nor there.

This is the crux of the matter. Due to this recent death it has got me thinking about dying and stuff (yeah morbid I know!) and if I were to buy a property with the house I currenly have it would take me over the IHT threshold. So i thought that if I was to buy the house and put in in mine and my sons name if I dropped down dead next week and he officially owned half the house it would take it down to under the level.

I am sure its not as simple as this and there may be other tax implications that I am not aware of. I dont even know if I could get a mortgage in this way especially as my son already has a mortgage. Would I be able to get the mortgage solely in my name but own the house jointly or is this not possible?

Any viewpoints on this would be useful. I have not consulted a solicitor or anyone yet as this is just a thought I had which I am expanding on.

poppysarah

If you're thinking of it as an investment, then it's wise not to put it all in one basket.

It's not the best of time to be sinking money into a house but you'd need proper legal advice about it.

hethmar

grumpy old woman - as you already appear to have the security of your own house and son also has a home of his own - why dont you just enjoy the money?

He wont need it if you drop dead - he has the place you already own as an inheritance and he sounds set up anyway. As you have realised, this isnt the rehearsal, why stack up money for a future time that you may not see? Go on, spend it on some pleasure.

grumpy-old-woman_2

thanks both. hmm enjoy the money? Its funny but I have never spent money on things I dont need-my car is really old but reliable , that kind of thing but silly as it is it's just not in me to spend money on things that I dont really need. Sure yes I would love to go on holiday early next year and yes I could take a chunk out of my money to do it but I always think well yes then its gone! Its probably just me and the way I view money but would rather invest it somehow so that my children can have the benefit of it when i'm gone- am getting gloomy again I have noticed! I will have to have a long hard think about what to do

Acc72

Hi - just a few thoughts.

There are obviously tax implications etc. but speaking with an accountant / Trust expert can go over those.

Why are you looking at buying a house as an investment ? - if you just want to invest the money, then there are other ways that are less hassle (eg. where you don't need to look for / clean up after tennants).

There are also other factors to consider - what if you and you son fall out ? he may want to sell his share of the house.

Also, what if your son was to marry - his wife might want to get her hands on this money : this would be more likely if they were to divorce in the future, as she would have a claim agaisnt this asset.

Sorry to be even more doom and gloom !!

Premier_2

If you drop dead next week, the portion of the property equity you have given him may be treated as a gift on which he is liable to tax (you need to check that)

The mortgage will need to be in the names of the owner(s) usually. You probably won't find a lender who is prepared to lend the money to just one of the owners.

You could get a joint BTL mortgage even though your son has a residential mortgage of his own - BTL mortgages are often given based purely on anticipated rental income rather than any multiple of borrowers annual salary.

hethmar

I think you should change your attitude about need/want Ive been the same but having lost 3 relatives in the last few years - one only a couple of years older than me, I am now actually spending money for things that are nice and my make life better rather than things that I NEED.

PasturesNew

If you "invest" £20k of your money in property now it might all be gone by Xmas as the price drops.

"invest" £40k and, with all the other costs, you could find that you've pretty much wiped ALL of that out through falling prices AND lumbered yourself with a tenant from hell and a property you can't sell.

It's not worth the effort. Being a landlord is expensive and when things go wrong takes up a LOT of time.

If you don't know what to do with the money now, just save it until something crops up ... it's life, something will always crop up!

lincroft1710

There is no point taking out a mortgage to buy a house to leave to your children, even if you are obtaining rent from it. If you make a profit on the rent, it's taxable, you'll have to have a more expensive mortgage (buy to let). You'll have to have annual gas/electric inspections. If you invested part/all money in a guaranteed interest bond for 6 or 12 months, then for next few years you'd get some interest.

margaretclare

The most obvious pitfall of buying a house with your son (title of thread) is that you might fall out with son! In my experience, any of these investment/business/money transactions within a family are fraught with peril.

I'm afraid I take exactly the opposite view to yours. About people dying - well, I told my younger daughter 'this will all be yours one day'. That was the last time I ever saw her - she died a few weeks later at the end of 2002. More recently, my DH has been very seriously ill in recent weeks and nearly died. We are determined to make the most of every moment of every day we have left.

In September we spent approx £2,500 on a wonderful holiday, one that we'd been talking about for a few years. How glad I am that we did. Since his illness, in the past few weeks we've spent approx £4K between us which includes £2K on upgrading the bathroom, also new chairs, new curtains, and all that to improve our quality of life and our comfort. I have little sympathy with 'investments to be left to the children'. Let them make their own way in the world, assuming you did your best for them throughout childhood and adolescence and they are equipped to earn a living.

Mrs_Optimist

If you don't intend to spend the money on yourself and are going to leave it to your children in any event, how about treating them with some of the money now? That way you will have the enjoyment of watching them appreciate the gift, which you won't after you are dead and buried (sorry to sound morbid). They may need the financial help now. You could always retain half for yourself for a rainy day. I agree that sinking it into property now is not necessarily the best move. The market will eventually creep up again but it has to hit rock bottom first. You may not live long enough to see the upside again (sorry sounding morbid again I know but I am trying to think logically) so your children could lose out on the money in any event if it is tied up in a house that has negative equity after you have gone. I would recommend you speak to a qualifed IFA.