Should we do this?

Cacran

My daughter and grandaughter live in rented flat. She has a boyfriend who is not the father of her child. She has been seeing him for four years. They want to buy a house together. We are in a position to let my daughter have a lump sum for half the cost of the house. He has a deposit saved.He intends to get a mortgage for the remaining amount.
She only works part time on minimum pay. She wanted to contribute half for everything but could not afford to do that.
We could actually pay for all the house and him pay us back at a small interest, which would be another help to them.
What do you think?

dc197

If you thought it were a great idea you'd not be asking. So I guess you have your reservations. If you can share those it might help.

Derboy

Give her the money. Let him come up with the rest via a mortgage. Then you don't need to worry about being paid back if the relationship turns sour and your daughter will always be entitled to half the house.

If it ever goes belly up, you'll have the rest of your cash on hand to buy out his half if you so wish.

Richey_

Derboy I have a feeling the boyfriend will be entitled to half the equity in the house. The daughter would not be able to say I'll keep the paid off half and the boyfriend can keep the mortgaged half, would make getting divorced very expensive indeed if one partner got the equity and the other got the debt!!
I would imagine there would need to be some sort of agreement made through a solicitor that the daughter gets the money put in back first in the event of a split and the the equity left is given to each person equally.

frugalsmurf

I'd think this is a question for solicitors as you cant mortgage half a property. You could give her a deposit and then them both mortgage the other half? And get it written that she's got more financial interest in it. My friend did this as she owned a house before so had a big deposit. (Relationship later failed so thank Goodness she did)

danslenoir

Richey_ wrote: »

I would imagine there would need to be some sort of agreement made through a solicitor that the daughter gets the money put in back first in the event of a split and the the equity left is given to each person equally.

That's not really fair on the boyfriend if he is the only one contributing to the mortgage. OP's daughter would get the deposit back PLUS half of whatever additional equity has been gained through paying off the mortgage, and boyfriend would get half of whatever additional equity has been gained through paying off the mortgage that only he contributed to.

westernpromise

She needs a thing called a Deed of Trust that states who owns what percentage of the house.

She and he are in much the same situation as I and my other half were when we bought (we aren’t married). She put in a lump sum of cash, and I put in a smaller lump sum of cash, plus I borrowed against my salary to raise the purchase price.

So to illustrate that with some made-up numbers, the house was £500k. She put in £150k of that. I put in £100k, and borrowed £250k. This adds up to the £500k price of the house. We then had a Deed of Trust drawn up which shows that she owns 30% of the house (150/500), while I own 70% (the other 350/500). She funded her 30% with cash, and I funded mine with cash plus a mortgage. The mortgage is in joint names at the lender’s insistence, but she doesn’t work and I pay the whole thing and all other expenses. So, as the mortgage is effectively my debt to pay, it’s fair to count it as part of my share of the house.

In there were ever a split, we would sell the house for (eg) £800k, and she’d get her 30% of that back, which is £240k. I’d get the other £560k, but of course, out of that I’d have to settle the mortgage.

You could probably construct something similar. What worries me slightly is the bit where the boyfriend’s share is funded by you becoming his mortgage lender. He should logically get a proportionate share of the house based on how much of the price he is funding. But if they split up, you’ve got to get your money back off him. In practice, to do this he’d have to either sell the house, or go and get a normal mortgage and use that to repay you. It may not be possible to do either in the circumstances of the day.

Likewise if he falls into arrears with you, you have to be able to get that back. You shouldn’t be repaid by your granddaughter on his behalf in months when he can’t make it. That would mean that his percentage share is being funded by her money, which isn’t fair.

Edit: just to note that if she were also paying half of the bills, including the mortgage, then that should be reflected in the shares set out in the Deed of Trust. So to use the same numbers again, she puts in 150, he puts in 100, and they share the 250 mortgage. That would give her 275/500 and him 225/500, so 55% to her and 45% to him. When they sell for say 800k, they clear the mortgage leaving £550k and she then gets 55 of what's left while he gets 45%.

princeofpounds

What Westernpromise said.


http://findlaw.co.uk/law/property/buying_property/deed-of-trust.html and many other links available on google.


Contribute enough to buy half the property if you like, gift it to your daughter. She can then buy with her partner, with an agreement that she receives half the proceeds of the sale price, he is responsible between them for the mortgage liability etc.


These things are pretty clear and strong. They aren't perfect, in very esoteric situations.


For example, she still needs to part of the mortgage and if he defaults, she might end up on the hook (although the low LTV means it shouldn't be too dangerous).


But a solicitor can walk her through all that.


Privately lending a mortgage is also possible, but I would argue against it in this scenario, as you are potentially making a bet on the relationship for 25 years, and on the ability to recover money lent. The net benefit of lending with a cheap private mortgage is likely to be similar to just making a few tens of thousands extra gift, which is a much simpler way to do it.

Cakeguts

What I would like to suggest is to leave them to sort this out themselves without any money from you. Some people find that accepting money from relative to help with houses etc is a reflection on their ability to look after their partner properly. These people are both adults they aren't small children or a charity. Please allow your daughter's partner to have his self esteem left intact by being able to buy a house with your daughter. What you can do is to offer to pay for any extra lessons or hobbies that your granddaughter would like to be involved in.