Daughter Buying Me A House: Pitfalls? Advice?

holly_hobby

The regulated part is in relation to the OP saying that they wish to rent the property from their Daughter.

This means that a buy to let morgage needs to be arranged (which permits the D to live elsewhere and rent to A.N.Other in this case her parents).

Buy to let, as semi commerical mortgages, are unregulated by the FSA - which simply means that the borrower (mortgagor) does not have the same consumer rights and protection as they would have with a reguatled mortgage.

However, as the tenants are to be family members, this has to be an regulated buy to let - which although fiddly, there are lenders about whom will look at this.

BUT, the real issue is the deposit coming from Mum and Dad, and the legal implications of it.

Whilst I can understand why the OP, would think this to be a simple and straightforward mortgage application - the reality is somewhat different given the parameters being worked with.

(even a mge for a dependants, instead of a BTL, wouldn't work, because of the gifted deposit issues).

The only way around this would be to lie and say the deposit was from her own funds, or not reveal her parents are to reside and the gift is made without any reservation.

But she's stuffed if they ask for an audit trail of the money, and/or an tenancy agreement in respect of a BTL mge, which of course would have to be in her parents names as they are the tenants, unless they lie on that too .. and what web starts to be woven !!

Hope this helps

Holly

BurnleyBob

I find it ironic that these money lenders who charge interest might want an audit trail. No wonder we never see anything on the box relating to the scam that is fractional reserve banking because we can't have Joe Bloggs become aware of how they get robbed.

Can't the OP transfer the gifted dough to a trusted third party who then gifts it on to the daughter?

xylophone

Perhaps the OP should approach the local council first to see whether there are any one bedroom properties for older people available?

I knew someone who had always rented privately - she had been in the same property for many years but the landlord sold the house and various complications ensued.

An attractive one bedroom flat in a housing association scheme was found for her - this would solve the OP's problem without involving his daughter?

holly_hobby

Well, they could, but a gifted deposit will only be accepted if it comes from a close family member - and whilst a paper trail may suggest that it isn't directly from Mum & Dad, all those involved know that it is, and it still remains a gift with reservation (unfortunately no matter how many middle men may be used in the paper chain).

I know its incredibly frustrating, but the regs lenders have are for a reason, and that is to protect their interests if the property was to become the issue of a possession orde (PO), and to avoid the prevention of a PO by Mum & Dad claiming beneficial interest via their "gifted" deposit - (which I say, and I know harping on a point, isn't a gift without reservation at all, as it has been provided in direct exchange for their residency in the property).

There are of course "ways" around it, but they involve telling porkies .... which amounts to mortgage fraud (and not a nice lane to go down or be discovered by the lender !!)

Sorry, I know this isn't much help .... but it is factual

Hope this helps

Holly

holly_hobby

xylophone wrote: »

Perhaps the OP should approach the local council first to see whether there are any one bedroom properties for older people available?

I knew someone who had always rented privately - she had been in the same property for many years but the landlord sold the house and various complications ensued.

An attractive one bedroom flat in a housing association scheme was found for her - this would solve the OP's problem without involving his daughter?

Thats a great suggestion X. .... and I feel the most suitable given the issues for all.

Holly x

thelem

WoodruffsDad wrote: »

This is getting too complicated! It's really very basic: We (wife & I) need a modest home soon. I am too old and too uncreditworthy to get a mortgage on my own merit.

That's because it is complicated. Transferring large sums of money, buying a house and being a landlord are all complicated in their own right, you're suggesting doing all three and having a family relationship in there to complicate things further.

My 31 year old daughter is living with someone, she has NO desire to buy a house to live in and has never owned a property.

Why does she not want to buy a house to live in? If she doesn't want to be tied down to one particular location or size of house then great, but will that change in 5 or 10 years? If she doesn't the potential stress, risk and hassle of buying a house, then she'll get all that and more by becoming a BTL landlord.

My daughter would find it unlikely, as a first time buyer, to obtain a buy-to-let mortgage.

She needs a buy-to-let mortgage or she has to live it in herself. If she can't get one, then you'll need to do something else.

Regarding the deposit, does she have savings of her own? Could she use those as the deposit, and then you give her a gift for something else at a later date. Definitely get some legal advise if you think that might work, as it's definitely bending the rules, but I don't think it would quite be fraud.

Private rental prices locally are obscenely high.

Compare the cost of a rental to the cost of the mortgage interest she would be paying (say £500/month), the money you are losing through not having savings (say £50/month) and the maintenance costs and insurance costs.

Fire_Fox

WoodruffsDad wrote: »

My wife and I live in rented property which we will soon have to vacate. We are too old to get a mortgage in our own right so my daughter (who will be a first time buyer) has volunteered to buy a small property in her own name around the £100k mark providing I pay the deposit and the monthly mortgage repayments. I can easily afford to do this and I would "gift" the deposit to her just as that nice Mr. Cameron has urged us parents to do!.

My question is, in order to avoid any future problems, should my daughter take out a buy-to-let mortgage and draw up a tenancy agreement with my wife and I or is there a better way?

I assume that my daughter will be taxed on the "rent" I will pay but will get tax relief on the mortgage interest. Will the two wipe each other out?

Is buy-to-let and tenancy agreement the best way to go? I need to be sure that we're safe in case of any future health problems as the years go by!

- Your daughter would be a landlord and have to comply with reams of legislation
- It would have to be a BTL, cannot be a residential mortgage because she will not be resident (unless you fancy committing mortgage fraud?). Many lenders don't permit letting to family
- Could you get a mortgage with your daughter as guarantor?
- DWP/ council may see this as a 'contrived tenancy' so you won't get HB/ giving away money could be seen as 'deprivation of assets' if you later need care
-Agree deposit is not gifted if there are strings attached, you will be the tenant

- You are only safe whilst your daughter's circumstances don't change, having a property she does not live in and an extra income means she will not get many means-tested benefits if she falls ill or injured and cannot work, redundant, nightmare pregnancy, or ends up a single parent
- what happens when your daughter wants to buy her own home?
- have you considered apply for a social housing bungalow or flat? If you have health issues you should get a higher priority.

franklee

WoodruffsDad wrote: »

This is getting too complicated! It's really very basic: We (wife & I) need a modest home soon. I am too old and too uncreditworthy to get a mortgage on my own merit.

But are you proposing to pay the deposit and mortgage payments (presumably repairs and maintenance as well) with no financial input from your daughter? In which case the lender who would have rejected your mortgage application will be relying on you to pay under the scheme you wish to come up with. Maybe I'm missing something but isn't that exposing the lender to the exact same risk they rejected? What's more if you go for the landlord/tenant setup then the whole thing is more expensive as the rent will be subject to tax. You need to be clear what financial help your daughter will be expected to contribute.

I would have thought it's better for you to get a mortgage if you can especially if you have a decent deposit. Have you spoken to a broker to exhaust that possibility?

If your finances are sound now then why not rent a bit and save more deposit to buy? Why are you having to vacate your current home and why was that cheaper than renting normally? It sounds like you are going to drag your daughter into your financial problems is that wise? Rent may not be that much more than mortgage interest payments, rental yields on houses are typically say 4-6% similar to mortgage rates and the deposit money should earn a bit of interest as well.

seven-day-weekend

19lottie82 wrote: »

I hear on here a lot that lenders don't like "gifted" deposits, but my Mum gifted mine (thanks Mum! :j), this was fully disclosed at the time and nothing was even mentioned about it. The lender was Halifax btw.....

HOWEVER, I did have a good (in fact, great) credit rating, a perm job and no other debt....

We gifted our son's deposit; the solicitor just needed to know it was in fact a gift and didn't need to be repaid.

(However, if he wins the Big One on the Premium Bonds......:rotfl:)

In the OP's case, how about - Bank of Mum and Dad give their daughter £20k. This lives in her bank for six months.

After six months, she then applies to buy a house as a BTL, using her own £20k as a deposit.

What's wrong with that?

Fire_Fox

seven-day-weekend wrote: »

In the OP's case, how about - Bank of Mum and Dad give their daughter £20k. This lives in her bank for six months.

After six months, she then applies to buy a house as a BTL, using her own £20k as a deposit.

What's wrong with that?

It's already been explained that the problem lies with it being a gift with reservation, the OP expects their daughter to use it to purchase a BTL property and for the OP to be the tenant. How is six months going to change that? What you are proposing is covering tracks - lying by omission? - not changing the fact that it is not a no strings gift.

If there is no written evidence of the agreement for the OP to be the tenant they have no come back if the daughter kicks them out after the first six months and refuses to return the 'gift'. Yet the OP said they "need to be sure that we're safe in case of any future health problems as the years go by!"