can I provide a mortgage for my daughter

lucy1960

Hi everyone,

I'm hoping someone can give me some advice on whether it is possible for me to provide a mortgage for my daughter to buy a home. I recently inherited some money unexpectedly and to be honest I don't really need it just now and probably won't ever need it as I'm retired and lead a modest lifestyle on a secure income and I'm happy with that. But my daughter is getting married next year and I'm guessing that they will struggle to get a mortgage, particularly to buy a house in the area where they would like to live which would be near to me for visiting and maybe minding grandchildren at some time in the future. But I've always tried to teach Susan the value of money so I didn't just want to give her the money outright. Also her fella seems a decent lad but I thought I would need to think carefully about what would happen if the marriage don't work out in the end. I also don't want the worry of managing all this money as well. So I wondered if I could maybe provide a mortgage or some other type of formal loan arrangement so that they could buy the property in their names and pay it off say over 20 years, interest free. I don't need the interest and Susan could still feel as if she was mostly paying her own way in life with the advantage that we could live close to help each other out when needed. She's an only child and will get it all in the end anyway but I'd like to give them something now with warm hands. Would a solicitor be able to set that up for us? Are there any complications that I would need to think about? Any suggestions for a better way?

Thanks very much for taking the time to read this and any advice would be appreciated, Lucy.

kingstreet

Excellent idea. I'd say it's a solicitor job.

jonusb3

But this did not make

holly_hobby

Hi

Yes you need the services of a solicitor - there may be IHT considerations with the donation of the capital (dependant on the net value of your estate on death), as a PET (potentially exempt transfer). Which means that if you die (I know sorry !), within 7 years of the "gift" - then your estate may be liable to an IHT bill (as I say dependant on the total net value of your estate should death occur within 7 yrs of the gift/transfer).

There may be a way to mitigate some of the liability by charging interest on the monies - your solicitor should be able to assist if this is viable.

Any PET lilability can be covered by an insurance policy called a "gift inter vivos" - which is a single premium 7 year decreasing benefit policy. (the initial sum assured will be the total amount of potential liability, which will reduce in line with the standard PET matrix).

You should (if not already addressed) effect a will and/or some trusts for the benefit of your daughter - again your Solicitor will assist.

Hope this helps

Holly