Buying house for my child

investo

Hi All

I'm interested in buying a new build property for one of my children to live in, where they would pay me rent on a monthly basis. I have the money to buy the property outright and don't require a mortgage. The rent requested from my child is more to ensure they understand that everything isn't free, more than to make money myself. I'd simply give them the money to buy their own place but I have other children (who already have their own properties) and it wouldn't be fair to them.

The property developer says I must sign a legal declaration to confirm I will not be buying the property as a buy-to-let investor. I'm unsure if I can sign this agreement based on what we intend to do. My Child would be living in the property for the foreseeable future and I have no intention to offer the property for let at an estate agents etc in the future, but things may change if after say 10 years my child decides or can afford to buy their own place.

Any advice would be greatly appreciated.

Thanks

I

19lottie82

If you buy a property for your child to live in, and they will be paying you rent then you will be their Landlord and they will be your tenant.

If you take a residential mortgage and the lender realises this is the case then they will be within their rights to cancel your mortgage.

To do things by the book, you will need a BTL mortgage in place.

shaniannie

19lottie82 wrote: »

If you buy a property for your child to live in, and they will be paying you rent then you will be their Landlord and they will be your tenant.

If you take a residential mortgage and the lender realises this is the case then they will be within their rights to cancel your mortgage.

To do things by the book, you will need a BTL mortgage in place.

But...

investo wrote: »

I have the money to buy the property outright and don't require a mortgage.
I

OP - you would have to declare the rental income to the tax man and pay the relevant tax on it. Which will/may/could cause complications with the restrictions on the buy to let investment. I guess you need to speak to a solicitor.

investo

thanks for your reply, as I said in my original post I would not be requiring a mortgage of any type (buying outright). The contract I am talking about is with the developer of the property, not any financial institution. Does the same apply, would it be any different if I didnt charge my son any rent?

System

19lottie82 wrote: »

To do things by the book, you will need a BTL mortgage in place.

OP stated

I have the money to buy the property outright and don't require a mortgage.

Even though you are not getting a BTL mortgage you are still buying it as a BTL even though you are keeping it within the family.

I am not sure what action the developer could take against you however. Worst case declare the contract invalid and claim the house back

System

investo wrote: »

Does the same apply, would it be any different if I didnt charge my son any rent?

I think it is semantics. Even if you don't charge rent you are still a landlord and letting the house for £0pm

kingstreet

Ask your solicitor for an opinion on the legality of such a declaration.

quidsy

Genuine question but why does the developer care what you do with it once you own it, it is yours to rent or leave empty as you wish right?

lee111s

How about instead of renting the house to your child, you act as a mortgage lender and the money they pay you can go towards paying you back for the house? You can lend them on a 0% interest basis. By doing so you're not purchasing a buy to let...

19lottie82

investo wrote: »

thanks for your reply, as I said in my original post I would not be requiring a mortgage of any type (buying outright). The contract I am talking about is with the developer of the property, not any financial institution. Does the same apply, would it be any different if I didnt charge my son any rent?

dohhhhhh...... sorry OP!

investo

quidsy wrote: »

Genuine question but why does the developer care what you do with it once you own it, it is yours to rent or leave empty as you wish right?

This is the ironic thing. They want to encourage first time buyers and young families (which is what my son is) to purchase properties on the site to help build a sense of community. They see stopping Buy to Let investors from purchasing as a way to do this.

My son tells me this is because the site is very popular and would likely fetch I high amount of rental income. We're genuinely not interested in its rental value though as we just want to ensure my son and his family can live in an area he likes (he's rented in the area for the last 5 years) and feels safe.