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

kinger101

booklover wrote: »

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

Because if they have other loans, it affects their ability to make repayments on mortgage.

booklover wrote: »

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

And the bank will come to their own conclusion on what is affordable. You're not their underwriter and they don't care for your opinion.

tripled

booklover wrote: »

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.

Why do they need such a large deposit? If you are going down the "gifting" route, I would suggest that you "gift" them the smallest amount possible to help them get a mortgage. Another 10k would give them enough for a 15% deposit - which should be ample - and far less risk to you.

It could be that you "gift" them the 50k, everything goes swimmingly, you get your money back and everyone's a winner. But if they should be unable to work for some reason (accident, major economic crash/job losses, illness, etc.) you could end up losing the lot.

Andypandyboy

I agree with the above. We helped our kids out with deposits but only to the amount we could afford to give, as lending can be fraught with issues and if it goes wrong can damage family relations.

Some scenarios are; their relationship breaks down girl is left in property and sees no need to continue to pay you, son can't afford his share of mortgage and to rent somewhere to live, so can't pay you. One or other of them lose their jobs, the mortgage is their priority, ditto illness.

I wouldn't consider lending that sum in your positions either. What would be the timescale for repayment? If they can afford such large repayment monthly on top of mortgage payments let them save that amount of money towards a deposit. 40K will take a long time to repay.

Cakeguts

If you were to do this you would be giving up some of your security if anything goes wrong and you find yourselves needing the money. So you need to find out what your son and his partner have given up. They can't have everything. They can't have new cars and car payment plans and they can't have the latest gadgets like the latest phones and expensive contracts. They have to show that they are really serious about saving for a deposit. Are they?

UKSBD

Is the £10k they have not a big enough deposit on a £140k property?


If not, could you not gift them a smaller amount (say £5K) and then lend them more (if they need it for furnishing, carpets, etc.) after they have bought the property?

warby68

Is just sounds too much for your circumstances - you can set up all the legal agreements in the world but if they can't pay they can't pay. A solicitor can set up a framework of repayment terms and conditions but none of it makes them actually able to pay for the term required.

You really sound as if £40k-£50k would be too much for you to gift/lose and it really is at risk however good their intentions.

Unless there is more to the story - say they are buying something that needs work and will then remortgage. Lots of different risks but a shorter time period of risk possibly.

If its just because they have tiny incomes or haven't/can't save then neither of those bode well for taking on debt repayments in excess of what experienced lenders think safe.

If its to get them cheaper rates for lower LTV then you'd probably have to lie and say it was a gift - not the best plan

smile88egc

They only need £28k in total to get them a 20% deposit which will get them a pretty favourable mortgage rate. Is there any reason they need to put down more than this?

I'm currently saving for my first house and have been doing so for the past 2 1/2 years, my parents know I will be asking them for a bit of help when the time comes, but this will be in the range of 4-5k just to get me up to 20% deposit, I wouldn't dream of asking them for as much as 40k as a gift or a loan.
For me and my parents, they will be gifting me the money, and I will be choosing to gift it back to them in chunks, as and when I can afford to, almost certainly within the first 2 years of buying the house. This arrangement takes a lot of trust, and a very stable job and income which I thankfully have (also will likely take out an income protection plan once we have a mortgage). I hope you manage to come to some agreement, let us know how it goes!

SmlSave

It is possible, but not always easy, to get a lender to agree to you having a second charge on the property. After you go through the palava of getting the lender to agree there are then extra legal fees to make your loan official. It is the best way to protect your money though.

The next way is to gift your son the money and have him do a Trust Deed where the first £xxx goes to him/you.

freeisgood

I will think long and hard about loaning 40K to your son, even if you have a very good relationship...you have to accept the possibility they might start missing payments...as "sorry mum and dad the boiler has broken and we need the money to fix it" or "lost my job, can we stop the payments for a few months" etc etc etc

Don't loan to a relative unless you fully accept the possibility you might lose the lot or most of it, I speak from experience!

AnnieO1234

Could you buy the property and then set up a rent to buy agreement with them? Xxx