Lending money to son and partner to help them buy first house

booklover

Hello

Just wondered what your thoughts are on our situation. Basically my husband was made redundant last year and received a reasonable package. We are managing ok, though I only work pt and have no pension. Husband is 60 and I'm 53.

My son and his partner want to buy a house (need a lot of help re their deposit) and DH suggested lending them approx 40-50k as a deposit. Would we need to go through a solicitor to organise this and have standing order set up re payments?

Many thanks in advance. :A

Mojisola

Mortgage companies won't accept a loaned deposit - it will have to be a no-strings-attached gift.

tripled

The bank will want to know where the money has come from for the deposit. Being a loan as opposed to a gift may be an issue.

[Deleted User]

Having a loan will reduce their affordability figure.

booklover

Mojisola wrote: »

Mortgage companies won't accept a loaned deposit - it will have to be a no-strings-attached gift.

Oh I didn't know that. Thanks. We'll have to go back to the drawing board now.

booksurr

your son's mortgage lender will require evidence of where the deposit money comes from

his solicitor acting on behalf of that lender will require you to sign a letter confirming the money son is using as a deposit is a non repayable gift from you

you can either lie (how can you be caught out after all) or you can tell the truth, that the deposit is in fact repayable to you. In the later case if the deposit money is borrowed then obviously it will significantly impact how much the mortgage company will lend since no one does 100% mortgages any more, which is what your son is effectively doing

of course if your son has money of his own the combination of mortgage plus parental loan may squeeze below the sort of loan to value ratio the lender is willing to accept eg: 95%, 85%, whatever!

booklover

tripled wrote: »

The bank will want to know where the money has come from for the deposit. Being a loan as opposed to a gift may be an issue.

Thanks for that. We cant give them 40k.

booklover

tripled wrote: »

The bank will want to know where the money has come from for the deposit. Being a loan as opposed to a gift may be an issue.

Why should the bank care though?? As long as their repayments are made. Or am I being naive?

pmlindyloo

booklover wrote: »

Hello

Just wondered what your thoughts are on our situation. Basically my husband was made redundant last year and received a reasonable package. We are managing ok, though I only work pt and have no pension. Husband is 60 and I'm 53.

My son and his partner want to buy a house (need a lot of help re their deposit) and DH suggested lending them approx 40-50k as a deposit. Would we need to go through a solicitor to organise this and have standing order set up re payments?

Many thanks in advance. :A

Only you and your husband can answer your question about whether to do this.

And yes, if you decide to go ahead then you should get the loan made into a legal agreement with repayment terms and interest laid out.

Questions you might want to ask yourselves:

How are the two of you going to manage financially if your OH doesn't get another job/one of you becomes ill (God forbid) etc etc

Is your son and daughter's relationship stable? What would happen if they separated?

Do they earn enough to get a mortgage and are able to pay back the mortgage.bills/the loan? Have they done their research and worked out an income and expenditure? What if they have children?

Have they looked at other options? A smaller property? Relocating? How much have they saved? How old are they? Can they not live at home/house share/rent and save for their own deposit?

personally I wouldn't even contemplate this unless the redundancy package was double the £50k and you could mange comfortably yourselves. Redundancy money is given to compensate for losing the job and providing you with enough money whilst a second job is found. At your ages you should be looking to enjoy your own lives rather than subsidising your off spring.

Yes, help them out by doing some research and helping them with budgeting, even paying for solicitor fees/new white good etc but that is a large amount of money to pay back on top of a mortgage so I would have to be absolutely certain that it would be paid back. Certainly if they are needing that much help then it seems unlikely.

booklover

booksurr wrote: »

your son's mortgage lender will require evidence of where the deposit money comes from

his solicitor acting on behalf of that lender will require you to sign a letter confirming the money son is using as a deposit is a non repayable gift from you

you can either lie (how can you be caught out after all) or you can tell the truth, that the deposit is in fact repayable to you. In the later case if the deposit money is borrowed then obviously it will significantly impact how much the mortgage company will lend since no one does 100% mortgages any more, which is what your son is effectively doing

of course if your son has money of his own the combination of mortgage plus parental loan may squeeze below the sort of loan to value ratio the lender is willing to accept eg: 95%, 85%, whatever!

Let's say we lent 40k and they had 10k - so 50k deposit in total. Now a property they like is 140k, so therefore, they only require a mortgage of 90k.

We've checked repayments and it's very affordable for them - plus their repayment to us.

Thanks for your help; much appreciated. :A

booklover

Thanks very much everyone. I'll be back again later.