Best way to help buy house for 22 yr old son?

lesleyk_2

Hello

We have three sons aged 22, 19 and 16. The eldest is working and on a reasonable wage (£18K), but not enough to buy a place of his own. We are considering selling our house, buying a smaller one on the same mortgage, and using the leftover equity (about £35K) as a deposit on a house for eldest son with a buy to let mortgage. Then he and a couple of friends could move in and pay rent.

The idea is that in a couple of years, we'd sell that house, give son any profit to set himself up, and do the same for middle son.

We love them dearly but I do feel it's time eldest had a bit of responsibility and freedom to stand on his own two feet. Would be really interested in hearing from anyone in similar position, or who has done this and found it worked, or didn't. Or do you think we'd be better off just giving him the money? The trouble is would have to do the same for other two sons which means we couldn't give so much.

Please let me know what you think.

Thank you and kind regards

katglasgow

My parents helped me buy my first flat when I was 25.
I had rented for years and my salary was slightly too low to get a reasonable mortage. My parents put down c.10k which amounted to 15% of the value of the property. They didnt "give" me the money, we drew up and contract and they basically owned a shar of the property. They got 15% of the net profit when it was sold 5 years later at nearly double what I paid for it!
I felt this arrangement worked well as I didnt feel I was taking advantage of them. It was a worthwhile investment for them and the money is now available for them to reinvest as they please.
It really helped me out as it reduced the amount of capital I had to borrow so I could shop about for a really good mortgage deal and keep my monthly repayments affordable too. I was grateful to their support but at the same time was standing on my own 2 feet.

saver6

My and OH did the same thing as katglasgow, with my dad putting down the deposit and leaving us a little extra, so he owns 8% of the house. We're still in the same house so he still has his investment. This arrangement also got us out of paying tax, as we would have had to do just that had he just given us the money. Unfortunatly, the tax system here is so bad that you're not even allowed to give that sort of sum to your own family without handing a good chunk to Mr Brown!

Sounds like you have a great plan to ensure the future of your sons, with also teaching them good financial investment behaviour (as long as him and his mates don't trash the house!)

lesleyk_2

Thanks for that it's really good to have some feedback as this feels like a really big step. I just think the quicker he gets a foot on the housing ladder the better as it seems to get more difficult each year and there doesn't seem much point him paying rent to somebody else. He is also quite keen to get a place of his own.

sanfrancisco

What would you do if the value of the property you brought for him went down in value?

You would loose your investment AND would be unable to help your other sons. Your eldest son would be stuck living in a place that he may grow out of/want to leave/move abroad etc etc. You would also be living in a smaller house, which might make your other sons more resentful of their elder brother, who seemed to get lots of help, where they get none and end up in smaller house.

How would you feel? What would you do? I think there are many people who could recount successful stories of doing this over the last 10 years. "It worked for me. Everyone was a winner!". We are in a different era now, and there are no guarantees that this would work anymore.

Do some more research. Also, would things be different if interest rates rose? Do lots of permutations to account for this.

mountainofdebt

but couldn't you offer to act as some sort of guarantor for his mortgage?

Also I don't see how it would be a buy to let mortgage if it was in your son's name and he was living there.......surely it would only be a buy to let if YOU took on the mortgage and your son paid you rent.

If your son took on the mortgage he might get preferential rates as a first time buyer and he would have an allowance (sorry don't know the amount for the 2006/07 tax year!) that he could offset the money he received in rent.