property ladder assistance for child

benmax1

Hi, Can anyone tell me if it is viable for me, the father, to buy a property on an interest only mortgage, to then sell it at a later date for no profit to my daughter when she and her husband can afford it.
They will be paying the interest only payments until that time, assuming it took 5 years and the recession was over, the property would have climbed in value slighty, but they would pay me the original price that i had paid, just trying to get them on their way so to speak, thanks for any replys.

McKneff

So just curiosity, but if they are paying the interest only mortgage why dont they just buy the house or am i missing something here.

I am confused becuase you say that they cannot afford it but they are going to be paying the interest only mortgage

benmax1

They cannot get a mortgage on their own, dont earn enough, so i will buy the property, but i dont want to pay anything myself, hence they will pay the interest only mortgage, until they can afford more, then i will sell it to them.
For arguments sake £150,000 interest only £675, repayment £820.

PasturesNew

Maybe the daughter/husband are unmortgageable right now.

You can buy the house and sell it later at what you like, but what if:
- they could never raise enough
- they split up
- they produce kids and want a bigger house and can't afford this one
- they lose their jobs and go onto LHA, can you pay the difference between that rate and the mortgage interest
- the house is worth 10% less in 5 years' time, where would the extra + deposit come from, will they be saving the deposit up
- who will pay for maintenance
- you might have to take out a special BTL mortgage, needing a bigger deposit
- as a LL you will have other costs (e.g. yearly gas certificate)
- they fall out and she moves out, he refuses to move out, loses his job and doesn't pay you rent - can you cover the cost until you get him through the courts to evict him ... and what if he trashes the place
- they fall out, he moves his floozy in

etc etc

Not saying it's a bad idea, but any one or more of the above MIGHT happen in the next 5 years.

GracieP

Imo, it would certainly be possible for you to sell to them in 5 years time without making a profit, as it's extremely unlikely that house prices will be worth more then than they are now.

hoggums

I guess you would only be able to buy the property on a BTL mortgage which will require a 25%+ deposit.

Regardless of whether they can afford the mortgage - can you afford it if your daughter doesn't pay.

If not - then you probably won't get the mortgage.

And what if house prices are lower in 5 years than now - or your duaghter wants to live somewhere else.

There are so many things that can go wrong here.

Tell them to rent until they can afford a house themselves.

benmax1

Thanks for replys, they actually have a small flat with one child, another expected hence the need to move, all points raised valid, who knows the future, i might win the lottery, no mortgage needed then, heres not expecting.

silvercar

A lot of lenders won't require you to have a BTL mortgage if you are letting to close family, provided you can pay this mortgage and whatever other commitments you have from your income.

McKneff

Phew, a bit of a minefield isnt it.
You dont like to think of things going wrong for your children but unfortunately they do. But you just have to hoep that they dont.

Good luck, whatever you decide.

Blacksheep1979

Is there no way you could loan the deposit to your daughter so that they can afford the property and they repay you over a period of time/at a later date?

Cissi

Nobody knows the future, but what will you do if house prices fall a lot further (like a lot of people believe they will)? Would you then be prepared to sell the house to them at much less than you paid for it, making a loss? Or if they feel obliged to pay you back the full amount (assuming that they're able to), how will you feel about effectively depriving them of any chance of trading up at a later stage by saddling them with negative equity? What if they're not prepared to pay above market rate at that stage and decide to buy a different house cheaper instead, leaving you saddled with an unwanted property with negative equity?

I can understand that you'd like to help them in their current situation, but I think this would be extremely risky in a falling market. Too many pitfalls.

Gracie, on this thread I actually agree with you :rotfl: