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

Mossfarr

I got around this in a different way. I bought a house jointly with my daughter. I put up half the value as deposit and got a joint mortgage for the other half which she pays.
The plan is that at some point in the future when she is better off (or marries) the house can be sold and the proceeds split 50/50. She can then use her share as a deposit on her next house.
This has worked without problem for the last 7 years and the mortgage will be paid off by the time she is 37 years old.
I was in a position to tie the money up though which you may not be.

tacpot12

Another option is for you to buy a property jointly with your son. A solicitor will be able to help record the amount that you own, and what your son & partner own. This way you are protected against most scenarios listed above, and can leave your share to them in your wills.

davidmcn

tacpot12 wrote: »

Another option is for you to buy a property jointly with your son. A solicitor will be able to help record the amount that you own, and what your son & partner own. This way you are protected against most scenarios listed above, and can leave your share to them in your wills.

Except OP would then have to sign up to a joint mortgage too. And they'd incur the additional property rate of SDLT (assuming they already own a propery).

Debtslayer

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.

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

Thanks for your help; much appreciated. :A

If the property they have seen is 140k and they have 10k deposit then you would only need to gift them 4k for them to get a 90% mortgage. Is this doable? Surely they could afford the mortgage payments if they could afford them plus paying you back for 40k? Why were you thinking of loaning so much money?
Remember also that buying fees etc will be approx another 2k on top of deposit.
Good luck with whatever you decide to do x

AnotherJoe

Mojisola wrote: »

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

That is absolutely and completely incorrect. I have loaned my daughter and SIL a large sum towards their house. It is a loan not a gift.

We had an agreement drawn up by a solicitor outlining the terms, which are that no repayments are required until the house is sold, when i reserve the right to get the money back. There is a second charge against the land registry entry so they cant just sell the house and run off with the money

This was acceptable to the lender, Santander. I had to sign an agreement that I would not be living in the property. I understand from posts here that there are other lenders who would also find this acceptable.

A side effect of what is in effect a very large deposit is that they got a very good rate on the mortgage due to the low LTV.

Zeebs90

My parent are helping us with a deposit at the moment, which they will expect back at some point. We have come to the agreement that we will give them each year the amount the money would have earned in interest in a savings account (which is currently all the money is doing) and then when we move we will seek to release some of the equity then to give back to them.

AnotherJoe

Zeebs90 wrote: »

My parent are helping us with a deposit at the moment, which they will expect back at some point. We have come to the agreement that we will give them each year the amount the money would have earned in interest in a savings account (which is currently all the money is doing) and then when we move we will seek to release some of the equity then to give back to them.

Is that done with the knowledge of the lender or "under the covers"? Eg you have told them it's a gift but it isn't really ?

Zeebs90

I should have explained a bit better - yes it is a gift, and they have no immediate requests for repayment ( and I think my dad understands that it is highly unlikely he will ever be able to get most of it back anyway but we will try to release some equity when we sell) - the interest payment was our idea as we feel bad for needing them to help us out and will only be if we find we can afford it but it is not a condition of us receiving the money, mearly a thank you to my parents if we (hopefully) can afford it

silvercar

Any joint ownership ideas will mean paying extra SDLT on the property. (assuming the parent owns a property).

SevenOfNine

We gave our son 5k then a further 8k towards his deposit to lower his interest repayment rate. His solicitor send us some legal paperwork to sign confirming it was a gift & we had no interest in the house.

'Under the covers' 8k was supposed to be a loan & he signed an agreement with us for repayment over 3 years at the rates of 3k, 3k, 2k. The Annual gifting threshold to wipe out the loan without him having to actually pay it back.