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

bagby

Kynthia wrote: »

You can buy 25% of the property as a joint owner and you would go on the mortgage and deeds. A deed of trust can be drawn up which specifies the percentages of ownership. The deed of trust will protect the parent's share should the child marry and then divorce, as only the 75% would be a marital asset. This will ensure that the parent would get 25% of the sale price and therefore should probably pay 25% of the buying and selling costs. However as all bills, repairs and maintenance costs would be revenue costs they could be met by the child as it is their home. As the parent doesn't live there then any gain they make is eligible for CGT.

If a lodger is found then the parent would only need to declare the income and potentially pay tax on it if they actually recieve a share of the rent. As far as I can see there's no reason that they have to recieve a share, as if the whole property was let and the joint owners are not married then the income doesn't need to be split according to ownership.

This is something like what I wanted to hear. If we went on the mortgage would all normal checks be made on three of us!

booksurr

bagby wrote: »

This is something like what I wanted to hear. If we went on the mortgage would all normal checks be made on three of us!

yes they would, that is the meaning of joint and several liability for the mortgage. The lenders needs to know that each of you can afford the mortgage on your own in case one of you defaults leaving the others holding the liability

if you are now a pensioner with a low income you will struggle to be accepted by the lender since you will not meet the affordability test. Not accepted on the mortgage means you cannot go on the deeds

as Kynthia points out there is however nothing stopping you having a legal agreement with your daughter over how the house sales proceeds would be split although obviously the mortgage must be repaid in full before you could get your share of what remains

bagby

as Kynthia points out there is however nothing stopping you having a legal agreement with your daughter over how the house sales proceeds would be split although obviously the mortgage must be repaid in full before you could get your share of what remains[/QUOTE]

Could we just have the legal agreement over how the proceeds are split without being on the mortgage?

Kynthia

If you aren't on the mortgage then you won't own a share of the property. So your 'share' won't be protected from any future divorce. The money will either have to be a gift to your daughter and you'll sign a legal document saying you have no interest in the property. Or you'll be loaning your daughter the money and this debt might affect how much a mortgage company will lend her, but your money will be more protected.

Thrugelmir

bagby wrote: »

Sister and I were looking for a buy to let property and thought that this way we would be investing and could also help daughter.

Either buy a BTL or help your daughter. Make a choice. At the moment you've made a muddle by converging all your ideas into a single plan. Which in all honesty doesn't work.

seven-day-weekend

bagby wrote: »

We wouldn't want the money back until she wanted to sell.

Therefore, as you want the money back at some point, this is a loan, not a gifted deposit, and some lenders will not grant a mortgage on this.

If you wish to have an investment in the property, you will have to be on the mortgage. You will have to declare your share of any rental profit (although you can set off your share of mortgage interest - but not the capital repayment - against the profit) and when she sells you will have to pay Capital Gains Tax on your share.

We helped our son with a similar deposit, but it was an outright gift. We are not on the mortgage and have no investment or share in his flat. This, imho, is by far the simplest way to help them, although of course you cannot treat it as an investment and do not expect to see your money again (unless they decide to gift you a similar amount when they sell, but they are not legally obliged to).