Gift Money to siblings to help buy property

bearsearch

I have a son who owns a house and a daughter who currently rents. I am looking at gifting a sum of money to my daughter to allow here to buy a property. As I can't afford to give the same amount to my son, I am looking to preserve his share of the money in some way so that it will be paid back to him at a point in time once my daughter can afford to take on the full mortgage and pay his share off. The house would be in my daughters name. Any advice on the best way of doing this would be welcome.

Pixie5740

bearsearch wrote: »

I have a son who owns a house and a daughter who currently rents. I am looking at gifting a sum of money to my daughter to allow here to buy a property. As I can't afford to give the same amount to my son, I am looking to preserve his share of the money in some way so that it will be paid back to him at a point in time once my daughter can afford to take on the full mortgage and pay his share off. The house would be in my daughters name. Any advice on the best way of doing this would be welcome.

That's not really a gift that's a gift and a loan. The loan part will be an issue for many lenders.

You could look into a Barclay's Springboard mortgage though. The money would remain yours and when your daughter is ready to remortgage you could gift both her and your son the money.

saajan_12

Give half and loan the rest of the money to your daughter.

Or if you're worried about Inheritance tax (if you give your son half later once the daughter pays you back, and die within 7 years of the gift to the son, then it could attract IHT), give half to your son and half to your daughter, and ask your son to loan his part to his sister. This only works if you trust daughter to pay son back and trust son to not recall the loan for some time.

xylophone

You have a sum of money which you are willing to gift to your children.

Would it not be simpler all round to give them half each now and for your daughter to adjust her expectations as to amount of money she can afford to borrow on the top of the gifted deposit?

bearsearch

Thanks. I think my daughter would need the full amount of the gift to buy a house so not really an option to just gift them both 50% of the gift. The idea of gifting to both but my son giving my daughter a loan is a possibility though wouldn't they need some sort of legal contract for that (circumstances can change) and wouldn't it affect the amount she can borrow if she has a second loan ? or are there ways round that ? Hit is a consideration, which is why we want to gift the full amount rather than loan 50% of it.

xylophone

The mortgagee might not be happy about the loan from your son to your daughter.

Red-Squirrel_2

Its not a gift if there are strings attached and obligations in the future.

Have you spoken to your son? Does he get on well with his sister? If he has been fortunate and ended up better off he might not begrudge you giving her the money if she has ended up less well off through no fault of her own. Maybe you could speak to him about alternative ways of making it up to him like a slightly larger share in the will (although there is always a risk with that of the money being gone by that point for care) or a charge on your house or something that I can't think of but that someone else on here may be able to suggest?

saajan_12

Here are your options
1. Barclays springboard mortgage or similar
2. Give her all the money so mortgage lenders treat it as a deposit entirely. Then you can't enforce the return of any of it as you'll likely have to write a letter stating it is a gift and you don't hold a share in the property or expect it to be returned.
3. Loan 50% of the money (either from you or from son to save IHT). Then lenders may treat it as a loan and reduce the total they are willing to lend.

Pixie5740

bearsearch wrote: »

Thanks. I think my daughter would need the full amount of the gift to buy a house so not really an option to just gift them both 50% of the gift. The idea of gifting to both but my son giving my daughter a loan is a possibility though wouldn't they need some sort of legal contract for that (circumstances can change) and wouldn't it affect the amount she can borrow if she has a second loan ? or are there ways round that ? Hit is a consideration, which is why we want to gift the full amount rather than loan 50% of it.

You can't have it both ways. Either it is truly a gift or it is partly a loan. If you claim it's a gift then the mortgage lender will ask you to sign a document declaring that it is a no-strings-attached gift and that you will have no interest in the property. On the other hand if you want it set up as a loan between her and her brother then that will reduce the number of mortgage lenders willing to take her business and will impact the amount of money she can borrow. The loan option is also risky for your son. What if your daughter can't remortgage to release equity in a couple of years and it takes much longer for your son to get his share of the money?

bearsearch

Thanks all for your prompt replies. Sounds like you are all agreed. If anyone has any further suggestions please let me know.

warby68

This is casting the net a bit wider and might seem a bit gloomy but you could alter your will to adjust for this amount at a (hopefully much) later date so your son receives a larger share of your estate when the time comes.

Assuming of course you are not giving 100% of your assets away now.