university accommodation costs

dickybeau

My youngest daughter is going to university in glasgow next year. She has a childhood friend and they are considering sharing accommodation. At the cost of rental, I feel it would be a waste of money to rent but my share of a mortgage would be 75000. Assuming that I can borrow that amount in addition to my existing 100,000, how would I set this up so that my daughter would be the half owner but that my retirement savings come back to me when she takes over payment. Am I likely to need a joint mortgage with her? If so are there providers out there who would consider this kind of arrangement. I don't want to end up paying tax as well as my daughters living costs at university as this is on the outside of my financial limits. any advice on the financial process would be helpful. At the end of university, the girls would sell and use any equity to fund there own accommodation so the arrangement would last 4 years assuming they are bright girls. I have about £6000 in capital that I can put in and equity in my own home of around 120,000

lazy_girl

It is a nice idea to help out your daughter and her friend.

However, there may be a few issues. You mention selling up after 4 years and using the equity - what if there isn't any equity, can you/your daughter afford this?
You're likely to have to pay over the asking price for a nice house in an area close to the university - i had a few friends whose parents did this and they all had to pay more. Additionally, you have to think about maintenance costs, buying appliances, furniture etc that would be covered in a rental property.
Also I don't think renting is a waste of money, I think your daughter would learn valuable lessons and skills in having to sort her own accommodation out and budget for it.

dickybeau

The maintenance of the accommodation is not an issue as I am more than competent to manage that. House prices in the Glasgow area have not suffered hyper inflation as elsewhere but I am prepared for the possibility if it comes to that. The issue is whether to pay money to rent to someone else or to pay my assessed parental contribution to a mortgage.

as for your comments on parenting my daughter, you on't say how you know my circumstances or how you came your conclusion. It may be better for you to lead your life in that way but I want o offer help to both my daughters to gain an independent foothold in life.

lynzpower

I dont see what the point of people contributing is if you are going to shoot them down like this

as for your comments on parenting my daughter, you on't say how you know my circumstances or how you came your conclusion. It may be better for you to lead your life in that way but I want o offer help to both my daughters to gain an independent foothold in life.

I think that lazy girls statement about learning life skills is a good one. But if you are convinced that you buying her a house gives her an independent foothold in life, your version if independent & mine differs greatly. however, if you believe its the right thing to do then why bother to ask anyones opinion?

Isnt the sticking point how your daughter would be a co-owner, unless she has an income which would fuind the other half of the mortgage, im not sure how possible that would be? Will she be able to get the mortgage for the other half?

jennifernil

We are in Glasgow and have done something similar, it is certainly well worth considering. For a decent 2 bed flat the rent would be at least 600 pcm, how will your mortgage costs compare with that?
You can get cheaper flats, but some can be pretty dire.
I would not say buying your daughter a flat is a bad thing, she will still have to budget for bills and food etc and take responsibility for the day to day running.
If the finances stack up then go for it! I take it you have looked at the prices in the area? Which Uni will she be going to?
As to ownership etc..........our daughter is the sole owner and rents out the second bedroom and this goes towards the mortgage. The property and the mortgage are in her name and we are guarantors, so the amount she could borrow was calculated on our income and liabilities.
Are the other girl's parents in a similar financial position?
I would not go for a joint mortgage as then I think you would also have to be a joint owner and thus liable for CGT when the property is sold.
You could get a solicitor to draw up a simple loan agreement for the capital you would be putting in to safeguard its return when the flat is sold.
The other way to borrow the money would be to increase the mortgage on your own house and have the flat "mortgage free" . Most new good mortgage deals these days are for a fixed period which may not fit in with when the flat needs to be sold. So having no mortgage on it would give flexibility. The loan agreement between you and your daughter would then be for the full amount of her share of the original costs.
I think the fact she would be co-owner with another student might complicate things a bit.
If you need more info I will try to help.

dickybeau

Thank jennifernil. That is precisely the information I was looking for. I have identified a couple of areas. It looks like it is Glasgow Uni. Her friend's parents are in a similar position finacially and the girls have been firm friends since primary school. I am concerned about fallout but we can plan for that if the agreement is set up correctly. It looks like It might be best to follow the equity release approach to fund it. I am concerned about a potential tax liability. so want to be absolutely certain that I don't get that bit wrong. I have a small amount of capital because of early retirement so some of that might be useable in the short term but I don't want to give up my life just give the help that wasn't available to my wife and I when we were setting out.


The girls both have had part time jobs since they were 15 and will need to cover their living costs from that money which looks to be sufficient. My older daughter is also at uni and has kept a part time job so we are optimistic that she can manage. we hope to plan for emergencies with a fighting fund but short of the roof collapsing, most things are within my capabilities so will not cost apart from materials.

I note the other comments but the last time I looked it was money saving expert not parenting opinion that headlines the site and I was grossly offended by the comments about what is believed to be good for my daughter

Mrs_pbradley936

I posted this on another thread about Financial Advisors but some of it may by useful to you.

Well, I like to take notice of professionals in this area and do not begrudge them a fee. The last piece of advice I got I would have thought was illegal because it worked out so well. It concerned my son and letting him have the rental income from a flat (he was at university and not earning) which was in his name. He went to university in the South - we thought he was going to Nottingham and made plans on figures for housing there. The original plan was to buy a place and rent a couple of rooms (he would occupy one) and let the rent pay the mortgage. Anyway he ended up in the South so we could not afford a house there so IFA said we could adapt our plan and buy local (to us) then we pay the mortgage and let son have the rent. Rent was £550 a month and for us to give him that much would cost us a great deal more because we are tax payers. The money for his flat was raised by a mortgage on our house because we had no mortgage having recently paid it up. Have had the flat for 3 years, son has had £550 per month for all of that time PLUS about £30k in equity. I would never have thought of all that by myself!

Mrs_pbradley936

I agree with jennifernil about it having to be in your daughter's name not yours or even joint for CGT. We have a Deed of Trust drawn up by solicitor saying that place belongs to son with funds provided by us and that it cannot be mortaged and lots of other bits and pieces.

jennifernil

Hi dickybeau, If it is Glasgow Uni then you will be looking at the West End, one of the most expensive areas in town. If Strathclyde then you should be looking in the city centre. So you need to be sure of that first. Lots of flats come on the market in March/April as students finish end of June with graduation in July so are looking for a buyer to take posession maybe end of July. They don't want to hang about too long as the Council are very smart at sending out the Council Tax bills! Band E is about £2000 ! However, as I'm sure you know, a flat inhabited only by students is not liable, but you will need to submit the correct paperwork.
What is your location? Do you live close enough for her to travel if there is a problem getting a place for the start of term? Sometimes there are properties that don't sell so quick so you might pick one up at a more reasonable price in September/October. We are not that far away so only started looking in October and managed to get a fixed price deal.
I'm sure you have done your research, but I will just say anyway that you need to think about stamp duty, legal fees, survey fees, mortgage arrangement fees/further advance fees, property insurance, contents insurance, factors fees, cost of appliances and furniture, possibly some renovation or redecoration etc. If the property is not factored then they may have to pay into a residents fund and take their turn at stair cleaning. Also be prepared for emergency call-outs when something goes wrong/breaks down! This usually happens at about midnight on a Saturday!!! Being able to deal with small repairs yourself will help a lot! Make sure there are good locks, student flats are commonly targeted by thieves.
Quite a few places are sold on partly furnished, but the stuff may not be that great. Ikea is not too far away and great for student stuff. You probably also have some stuff at home she can take.
I would advise you to look for a place within easy walking distance of the Uni, buses/underground can be costly. Also makes it easier for studying in the Library and late nights in labs. 3rd year will be the worst for coursework.
Our daughter is doing a 5 year Masters in Software Engineering, what is your daughter planning to do?
If you end up buying an older place with high ceilings, be prepared for high heating bills, and gas central heating is essential. Double glazing would also help a lot. Our daughter has a modern place with smaller rooms, she pays about £40 for gas and electricity, £10-15 for telephone, £15 for broadband and there is also the TV licence. All these bills are split with her "lodger".
We pay the mortgage/insurance/factors etc.
She has a part-time job, just started a new one in the supermarket in Byres Road. There are some jobs around but also stiff competition for them, and most only pay around the minimum wage. In first year she worked quite a few hours (maybe 20) and most of the vacations, and saved her holidays from work to use before exam times. So she was able to save quite a lot.
Second year she did a bit less, and in 3rd year cut down to 8 hours, and stopped completely in April as she had so much coursework. This year she is doing 12 hours, so we shall see how it goes. She had a 12 week compulsory placement over the summer which was well paid, so her bank account is pretty healthy.
For Glasgow Uni the closest area is Hillhead, look also at Dowanhill, Hyndland, Partick, Kelvinbridge, Kelvinside, Yorkhill, Finnieston and Park. The further from Uni you go the cheaper it gets. Expect to have to offer at least 25% over the asking price. A 2 bed, lounge, kitchen and bathroom place in Hillhead will cost you upwards of £150k depending on situation and condition.

jennifernil

Forgot to say.........don't worry about tax, as long as the property is only in the girls' names there will be no problem.
Falling out might be a problem, but if they have been long-term friends that will help, hopefully they already know each others foibles!
It is important that they have some basic rules about stuff like cleaning and stick to them. Also sort out food. Will they shop and cook together, how will the money be organised? Having separate food may be better, but that needs more fridge and storage space. What suits them best will depend on whether they like the same food and will be home for meals at the same times.
You sound like a sensible person, so I assume your daughter can cook for herself, operate a hoover and a washing machine, and knows how to clean a bathroom?! And her friend too! If not, they have plenty of time to learn while still at home. You might be surprised how many students (and other young people) have absolutely NO idea about this kind of thing! My daughter's second "lodger" was a lovely 23 year old post grad who had no idea, so she had to go!
Lodger number 3 is a young man who is on the same course (no romantic attatchment) and he is pretty good, she just has to keep him in line now and again! I think he is frightened of her!
I think your first move is to agree the financial approach with the other parents as I would think you both need to do the finance in the same manner.

lazy_girl

dickybeau wrote:

I note the other comments but the last time I looked it was money saving expert not parenting opinion that headlines the site and I was grossly offended by the comments about what is believed to be good for my daughter

If that's your idea of a gross offence, then i apologise.

I wasn't giving you parenting advice, i was giving a suggestion for an alternative to a mortgage. Good luck with finding a place for your daughter.