Borrowing to help children

lppwrth

I am in the lucky position to be mortgage free, but have only small savings.
I am 52 and my husband is 54. We have a very modest second home which is also mortgage free, but have no pension provisions.
My daughter and partner are renting and cannot save for a deposit due to the high cost of renting.
I am toying with the idea of getting a loan....maybe £25k, to help them get a first rung on the property ladder.
What would be the cheapest way of doing this, the maximum term of the loan would be 10 years, as I would want to be debt free before retirement.
I have a very good credit record, should I secure a loan on my second home?
Advice please?

mrcow

Don't do it.

What's going to happen if they split? You'll be left with a loan that they can just walk away from. And the house could well end up a deppreciating asset in itself.

If they are serious about setting up together, then they'll start saving. Don't get involved. And certainly don't borrow money for it!

tonycottee

The cheapest way would be to secure it against one of your properties. Do you plan to give the money as a gift, or do you expect them to repay you?
My parents lent me money to buy my own home, which I paid back and will be eternally grateful for.

StuTheDon

I'm with MrCow on this one - dont do it, or at the very least if you insist you need to get some kind of loan agreement drawn up. Would it be an option to let them live rent free/low rent in the 2nd home you have so they can save for a year or two for a deposit themselves?

A lot of mortgage providors want to know where the deposit has come from - if it is from a loan they will likely not accept it. You would then have to say it is a gift, and therefore only have their word they will pay you back.

My parents, despite being able to afford to do so, left me to save myself and, whilst I did not appreciated it at the time, I know it was for the best.

jonesMUFCforever

Can't they live in the holiday home?

lppwrth

Living in the holiday home is not an option....to far to commute to work.
No-one has any suggestions on the cheapest methods of borrowing...not saying I am going to do it, but would like to know the financial implications if I did.
Thanks for all you replies and input...very thought provoking.

bouncydog1

I have a different view to some of the others - you know your child and it is commendable that you want to help.

However in your position I would be giving the money, not loaning, in the knowledge that if things don't work out it's nothing to do with me. I would also gift the money to your daughter on the basis that she protected her equity share in the property if greater than her partners. When a couple receive wedding presents they are not given on the basis that they must be returned if separation happens - this can happen to youngsters and frequently now happens to people where their children have left home - nothing is certain!

How about approaching your own bank and discussing the options with them. The cheapest way would be a remortgage, but you would have to accept that you must be able to afford to repay - what would happen, for instance if you fell ill and were unable to work - could you keep up the payments on your income as you have no pension provisions. Presumbly it is your intention to sell one of your homes at retirement age to provide pension income.

I have to say that provided my OH and I are mortgage free when our daughter wants to purchase her first home, we hope to be able to provide a lump sum gift to help her. However we would ensure that we discussed with her options if/when she bought a home with a partner, to ensure that she protected her equity share if greater.

It is horrendously expensive for youngsters to get on the property ladder and provided it is thought out carefully it is great if parents can help.

united66

bouncyd!!! wrote: »

I have a different view to some of the others - you know your child and it is commendable that you want to help.

However in your position I would be giving the money, not loaning, in the knowledge that if things don't work out it's nothing to do with me. I would also gift the money to your daughter on the basis that she protected her equity share in the property if greater than her partners. When a couple receive wedding presents they are not given on the basis that they must be returned if separation happens - this can happen to youngsters and frequently now happens to people where their children have left home - nothing is certain!

How about approaching your own bank and discussing the options with them. The cheapest way would be a remortgage, but you would have to accept that you must be able to afford to repay - what would happen, for instance if you fell ill and were unable to work - could you keep up the payments on your income as you have no pension provisions. Presumbly it is your intention to sell one of your homes at retirement age to provide pension income.

I have to say that provided my OH and I are mortgage free when our daughter wants to purchase her first home, we hope to be able to provide a lump sum gift to help her. However we would ensure that we discussed with her options if/when she bought a home with a partner, to ensure that she protected her equity share if greater.

It is horrendously expensive for youngsters to get on the property ladder and provided it is thought out carefully it is great if parents can help.

I'm with you on this BouncyDog, great answer. :T
I am sure some will dis-agree but what are forums for Everyone has their own opinion.

Foggster

My parents helped me get on the property ladder with my partner. They said they would rather see me enjoy the money now then when they had gone!

To secure my interest in the property we held the tenancy in common as opposed to joint tenants/owners with one another and I held a majority share.