Best way to give a large deposit on daughters first house.

bagby

Myself and sister want to pay 25000 towards daughter buying her first home and thought that we would have 25 per cent share of home named on the deeds. Daughter is then intending renting out the spare room to help pay her bills. We see it as a bit of an investment. Can anyone see any problems with this. Can't understand tax implications that we would incur? Would we be considered as receiving a share of the rent? There is also something about gift donation. Can anyone shed any light. I thought it would be straight forward.

DpchMd

As you are expecting to retain a financial interest in the property, I presume you will be on the mortgage too. Some lenders won't lend to more than 2 applicants.

Pixie5740

It's not a gift though is it? You want to be on the deeds and see this as an investment.

Does your daughter require a mortgage for the remaining 75%? If so then you will all have to go on the mortgage if you want to be on the deeds.

The tax implications for you and your sister will come when the property is sold when you may have to pay Capital Gains Tax.

G_M

You (part)own a property but do not live there: Capital Gains Tax on sale.

You (part)own a property on which rent is paid, so must declare your share of the rent for Income Tax.

If you 'gift' her the money, you will not own the property. But if you die within 7 years it will be included in your Estate for Inheritance Tax.

If you buy jointly, and jountly own, I'd advise you draw up an agreement about who owns how much ie if the property is sold

* do you get back the cash you've put in? and/or
* own a share of any increase in value?

If she has paid the mortgage for x years, should that entitle her to increase her % of any gain?

Who pays maintenance costs?

What if the property goes down in value?

bagby

Thought we would pay the deposit of 25000 then daughter would get mortgage for 75000. Thought this would mean we own 25% of property, get 25% of rent and would pay 25% towards bills (if rent includes bills.). Does the mean we have to go for joint ownership or will we have to go on the mortgage?

bagby

bagby wrote: »

Thought we would pay the deposit of 25000 then daughter would get mortgage for 75000. Thought this would mean we own 25% of property, get 25% of rent and would pay 25% towards bills (if rent includes bills.). Does the mean we have to go for joint ownership or will we have to go on the mortgage?

I thought it would be that we would get 25% increase or decrease in any value of the property. I thought this was the fairest way.

Also thought it would be investment as not getting much in the banks.

ethank

Are you intending to go on the mortgage as well. You will not be able to go on the property deeds without being a party to the mortgage also, as this would prevent the mortgage lender from being able to repossess the property if they needed to.

You can have more borrowers than owners, but you cannot have more owners than borrowers.

If you don't want to go on the mortgage - she will have difficulty in getting a lender to approve the mortgage as most lenders do not want to see that someone has borrowed a deposit. You would be required to sign something to say that the deposit is a gift and you have no interest in the property, which is clearly not the case.

G_M

As explained, if you joint-own, you will both (all) be on the Deeds so will both (all) need to be on the mortgage.

Asto who owns how much that is for you all to discuss and agree. hence my questions above.

for example, do you expect to get back your £25000 when the property is sold even if the value has gone down? If so that looks like a loan which must be repaid, rather than an investment which might grow, or shrink, over time.

bagby

Re. If daughter pays mortgage for a number of years then does she get higher %increase in value.


I thought if we gave 25% then increase in value would be 25%in years to come. If I am wrong then correct me. Like to hear other people's opinions because sometimes I can appear blinkered.

bagby

I hadn't realised we would have to go on the mortgage. Which isn't a problem. If we decide that we own 25% whether the value goes up or down would we get that drawn up by the solicitor when purchasing the property.

Also if we go on the mortgage for 75% of the cost of house but daughter pays mortgage. When we pay our 25% share of tax on the rent could we offset the interest off the tax of the mortgage?

bagby

Pixie5740 wrote: »

It's not a gift though is it? You want to be on the deeds and see this as an investment.

Does your daughter require a mortgage for the remaining 75%? If so then you will all have to go on the mortgage if you want to be on the deeds.

If we all went on the mortgage do we all have to submit our income details etc. or could daughter get the mortgage on her income alone.