low value deposit

bhindi

Hi, My head is fogged, 2 step sons aged 21 & 23, are both to inherit £5k each, they would like to get on the housing ladder, and the grandparent who has given this probably would be thrilled to see them make good use of this. 1 of the boys is in a permanent relationship, and is renting, the other still lives with his mum but desperate to get out.

They do not know about the money yet... but I am trying to find options to what they can do productivly with the money, before it gets spent on incidentals!

One option (girl friend permitting) is to see if they would all consider buying a property together. They probably could muster up another 1k each over a few months.

I am a big believer in long term fixed rates, (through bitter experience) and as I do not feel I could bail them out if rates go up, I would prefer them to fix.

But at best it seems if they were to buy a 2 bed maisonette in our area at approx £80k, all the fixed rates with approx £13k deposit that are available are 2 year fixed... I am worried about the next 10 years being affordable to them all.... I don't feel capable of guiding them unless I can be sure they are safe. Both biological parents, are either too busy or disintrestated in the case of the mother.

Any suggestions for unbiased advice, and avenues to explore.

I know some will say look to invest in other ways, but I really would prefer them to get on the house ladder now, as it just gets harder to hold money these days., and what little you have i feel ought to be securing the roof over your head.

Anyway... thanks, and sorry for the waffle.

poppy10_2

21 and 23 are young ages to be tied down into a mortgage, particularly a 3-way one. What if the relationship with the girlfriend breaks down? What if one or more of them wants to move away for work, or to pursue a new relationship?
A 2-bed house will be cramped if you are planning on all three of them living there together. If you are planning on it being purely a BTL investment then you have to bear in mind all the responsibilities they will have to take on as landlords.

Really, sounds like you have good intentions but are trying to control this a bit too much. £5k isn't a huge amount of money these days, and they are both adults. Let them invest (or spend) it as they see fit, after all, it is their money.

Simon11

I would suggest to them that they save up for a deposit.

Then once they are ready to move, let them know of this £5k inheritance. Then you know its going towards the cost of the house, reducing the mortgage while the sons have still have worked hard to save a deposit.

It does depends on the sons and how they see money. I've personally saved hard and I know my grandparends are gifting some money towards a place, but I'm still working hard to save

From a young FTB hopefully soon!

bhindi

Poppy10, I take your comments ...... I do mean well, and will never be forceful with the boys, just trying to arm myself with options as they are going to use me as a sounding board when they find out they have this money, and their father and grandmother will be peaved if its wasted on trivia.

I just want to see whats possible, thats as far as I can help, as ultimately once the money is in their mitts its down to them, but they ask me to help steer them, as they see me as the one who has the time to help them out.

The 23 year old I have just succeeded in turning his life from one of little hope(contemplating suicide) to getting him a job, new flat, and independance and a shoulder to lean on(me), so its not easy now to walk away. He expects me to carry on guiding him, where his parents have failed for different reasons.

Annisele

I agree with poppy10 - I think that encouraging them to buy a property together would be a mistake. There are so many ways it could go wrong - the couple splits up, the single one meets somebody who doesn't want to live with another couple, somebody has a baby, one wants to move and the other doesn't - and if you're the one who suggested it, then you might be held responsible for the hellhole they find themselves in.

I'm a firm believer in the "house prices go down as well as up" mantra. If you've got to the stage in your life where you want to buy a house to live in, and you can afford to buy, then there's an argument that you should do so whatever state the economy is in. If you can't afford to buy, then I don't think you should rely on the "fact" that house prices always go up. Unless your stepsons have other savings, I don't think that they can afford to buy - if they're buying singly then a £5k deposit is too small, and if they're buying jointly then 3 (possibly 4) adults in a 2 bed maisonette sounds horribly cramped.

I'm also a bit wary of long term fixes. I had a colleague who was very pleased to get himself a 10 year fix at 10%, but within a few years found that everybody else was paying 5% - fixes don't always work out in your favour!

Pupnik

I think they are still young and have a lot of time to save up, but that £5 can be a very helpful start to them. I'd suggest they put it away into an ISA where it can be kept safe for when they need it. I don't mean to sound mean, but if they can't manage not to spend it on trivial things then they are probably not mature enough to be responsible for a mortgage.