Helping daughter to buy flat

carly

My husband and I want to help our daughter to buy a flat costing £114000 . She will be raising a mortgage of £50000 ( about the max she could afford the repayments on, at this early stage of her career ) and we will be providing the remaining £64000. She is adamant that she would want to repay us as soon as she was able.

What is the best way to do this, reducing any tax liabilities for all of us.

I am aware that we can only give away £3000 each per tax year, without raising the prospect of inheritance tax so this is not ideal.

If we get our name put on the deeds of the flat, then presumably we would have a liability to Capital Gains tax on any future sale? as this would not be our main residence

We could lend her the money. I am certain that there would never be any question of her defaulting on her promise to repay the money ( yes I can hear everyone groaning, but this simply will never be an issue ). Are there any other pitfalls of doing it this way , that I have overlooked.
My main query is the effect of any future partner of hers seeking a financial claim on the property in the event of a break up. All advice will be gratefully received

carly

** bump **

jennifernil

If you have sufficient income you could stand as guarantors for the mortgage, this way the amount she could borrow would be based on your income. This of course would mean higher repayments, which you say she cannot afford. If you want to give her some money you could help with the repayments by giving her the £3000 ( and you can each give £3000 ) per year that is allowed under IHT rules.

If you gifted her the £64000 IHT would only come into it if you died before 7 years had passed.

If you want to lend her the £64000 as a deposit then I would have thought a solicitor could draw up a simple loan agreement. Be aware that some lenders may be unhappy at a deposit that is actually a loan from someone else. If it is an interest free loan then there will be no tax implications for you.

The future partner is a bit more difficult. Unless they are married, if he did not contribute to the mortgage or the upkeep etc, then I would not have thought he could claim anything. This is something you should probably take proper advice on.