Advise please, property for Son.

Sues48

I would be grateful for your thoughts/advice please on the following.

DH and I are are in the fortunate position of being mortgage free, property is valued at around £200,000, we have savings of approx £50000, and have a joint income of £55,000, we are both in our 50s(56&51).

Eldest son returned home to live after graduating last summer and, for all our sakes, needs to move out sooner rather than later . DH is dead against him paying rent to some stranger, in anycase DS is only on a low salary and couldn't afford to rent anything half decent, so we've been considering buying a second property and letting DS rent off us. I don't feel comfortable using all our savings as deposit and ideally wouldn't want to use more than £25000 which would mean we could get a BTL mortgage of around £45000, luckily we are in an area where property is quite cheap so would be able to buy a terraced property for around £70,000.

Alternatively, I wondered if it would be better to lend DS the money for the deposit and let him take out his own mortgage, he wouldn't need such a big deposit and would be able to get a better rate for a residential mortgage than we could on a BTL. The main draw back with this idea is that he changed jobs last month so presumably wouldn't be able to get a mortgage for a while?

Are there any other options we could consider?

BitterAndTwisted

Yes, that your son runs his own life and if that means you having to help him rent somewhere else in order to learn to be independent, then so be it.

Most young people don't go off and rent something "half-decent" the moment they leave home, they save up and find a flat or house-share. If he's not paying much or anything to you for his keep he should be making a start on getting some savings behind him.

I would be really disinclined to dip into my long-term savings to buy a property. What happens if your son gets a job-offer a long way away and then you're stuck in the property-investment business with no experience as landlords?

HAMISH_MCTAVISH

DH is dead against him paying rent to some stranger, in anycase DS is only on a low salary and couldn't afford to rent anything half decent, so we've been considering buying a second property and letting DS rent off us

Yes, parental help is vital if you can afford it these days as the banks are discriminating against FTB-s and forcing them to spend years enriching their landlords while saving for a huge deposit.

Try to stay away from BTL mortgages though, as they're expensive.

Better to look at a joint mortgage, dependents mortgage, or one of the parental "lend a hand" schemes where your son can get a 95% mortgage if you deposit the balance as savings with the bank as a guarantee. (although the rates aren't the best)

A 25% deposit will be enough to ensure your son gets a very good rate on the mortgage if you can do that instead. Speak to a good independant mortgage broker to find the best way to structure the purchase and most appropriate products.

poppysarah

HAMISH_MCTAVISH wrote: »

Yes, parental help is vital if you can afford it these days

Afford being the important bit.

Unless you wee money most people can't afford to help their kids out. They do it by either taking out expensive loans in their name, or digging into savings that they should be keeping for a rainy day.

A child wanting to own a property is not a rainy day.

BitterAndTwisted

Look at it this way: presumably it wasn't part of your retirement-plan to go into the investment-property business or you'd have done this already when you had more than only a decade of working-life ahead of you to pay off the mortgage. You are toying with the idea of spending half of your retirement-pot in acquiring a debt of £45k. A debt which may start accruing quite a large percentage of interest once rates rise, which they inevitably will. For people who are coming up to retirement age this is not looking like an attractive prospect to me.

Sues48

poppysarah wrote: »

Afford being the important bit.

Unless you wee money most people can't afford to help their kids out. They do it by either taking out expensive loans in their name, or digging into savings that they should be keeping for a rainy day.

A child wanting to own a property is not a rainy day.

It's more a case of getting him to move out for the sake of my sanity than him wanting a property. We have had so many arguements over the last few months that I feel like one day I'm going to lose it big style and then we'll end up estranged:(

We are not looking at dipping into our savings to give him a deposit to buy a property, as interest rates are so low they aren't increasing in value much anyway.

tyllwyd

One thing that strikes me is that family relationships are perhaps a bit strained - when you say he needs to move sooner rather than later. With family I'd say never lend money that you can't afford to lose. If things went badly, would you be comfortable as a co-owner of the house saying to him that he had to sell up and give you back your money? Have you thought about what would happen if the house gained/lost value?

You could buy the house yourself, and rent it to him. If you want to help him out more, put some of that rent money aside and regard it as his deposit that he is building up. Again, would you be prepared to act as a landlord and pay for repairs, or chuck him out if he didn't pay his rent.

TBH, if it was me, I think I'd probably give him cash for a 5% deposit as a gift, so that he can go and get himself a mortgage, and you both know exactly where you stand, and you don't get money messing up your family relationship.

Sues48

BitterAndTwisted wrote: »

Look at it this way: presumably it wasn't part of your retirement-plan to go into the investment-property business or you'd have done this already when you had more than only a decade of working-life ahead of you to pay off the mortgage. You are toying with the idea of spending half of your retirement-pot in acquiring a debt of £45k. A debt which may start accruing quite a large percentage of interest once rates rise, which they inevitably will. For people who are coming up to retirement age this is not looking like an attractive prospect to me.

The £50000 isn't particularly for our retirement, it is money we inherited from DH's late parents. We are both in final salary pension schemes and will both get a lump sum on retirement, but i must admit that having paid off the mortgage on this property I'm somewhat nervous about starting again.

poppysarah

Sues48 wrote: »

It's more a case of getting him to move out for the sake of my sanity than him wanting a property. We have had so many arguements over the last few months that I feel like one day I'm going to lose it big style and then we'll end up estranged:(

We are not looking at dipping into our savings to give him a deposit to buy a property, as interest rates are so low they aren't increasing in value much anyway.

And what happens if the arguments are nothing to do with living together?

You buy him a house, he falls out with you - you're stuck paying the mortgage on a house he gives you nothing towards?

poppysarah

Sues48 wrote: »

The £50000 isn't particularly for our retirement, it is money we inherited from DH's late parents. We are both in final salary pension schemes and will both get a lump sum on retirement, but i must admit that having paid off the mortgage on this property I'm somewhat nervous about starting again.

Don't let the son have the money for a house.

What if one of you gets ill - you'd find it would make your life so much easier.

Your son doesn't need you to buy him a house. He's an adult.

Sues48

PoppySarah, you've misunderstood, we wouldn't be buying it for him, we would own it and he would pay us rent to cover the mortgage payments.

i know from the 4 years he was at uni, we get on much better if we aren't living under the same roof.