Seeking advice on a Regulated Mortgage Contract with my daughter on an inherited property

Irishresident

Hi,

BACKGROUND

I have recently inherited from my deceased mother a 1/3 share of a property in Birmingham. I live and work in the Republic of Ireland and I am considering assisting my daughter in purchasing the inherited property . She is currently training to be a teacher in Birmingham and will begin full time paid employment in June 2021. This means she is currently not in a position to obtain a mortgage through the usual channels. I am therefore looking into the possibilities open to us and am considering entering into a Regulated Mortgage Contract with her.

LEGAL COSTS

My daughter is in a position whereby she has savings that can cover approximately 1/3 of the purchase price of the property. I wish to provide her with the remaining 2/3 and I believe the best way to do this is through a contract secured on the property. I would like such a contract to set out an agreed monthly repayment amount and also set a date, approximately 5 years from now, when I am to be repaid the full amount of the loan. I have contacted a local solicitor in Birmingham and been advised that such a contract and registering a charge with the Land Registry would cost in the region of £1500 to £1800 including VAT. I was wondering if this cost is a reasonable one for such a service? Are there any groups/organisations that specialise in drawing up such contracts between parents and their children (BOMAD)? Are their any groups /organisations that specialise in advising parents and children in such circumstances?

TAX IMPLICATIONS

I was also wondering what are the tax implications of myself entering into such a contract with my daughter? The property itself is worth under £200,000 and if it is sold now I believe I would not need to pay any Inheritance Tax. Would this be the case in five years time if I am only receiving back the sum I originally loaned to my daughter? I also do not intend charging any interest on the loan, so does this mean I will not have to pay any tax on the monthly repayments or on the final repayment in five years time?  Does the fact that I work and live in the Republic of Ireland and the property is in Birmingham have any additional tax implications?

 Thank you for taking the time to read this post and please feel free to mention anything obvious you feel I am overlooking.







 

getmore4less

Simple loan with a charge.
No tax implications of no interest.

What are you planning for non payment of the monthly installments or failure to repay on time.

Forced sale, kick the daughter out?

Check your Irish tax situation.

[Deleted User]

If she has a job starting in June 2021 then getting a conventional mortgage is perfectly within the realms of possibility

Irishresident

Deleted_User said:

If she has a job starting in June 2021 then getting a conventional mortgage is perfectly within the realms of possibility

Would she genuinely have a chance of getting a mortgage if she only starts work in June 2021? I thought ou would need to be working for at least a couple of years before being eligible for  a mortgage. 

[Deleted User]

Irishresident said:

Deleted_User said:

If she has a job starting in June 2021 then getting a conventional mortgage is perfectly within the realms of possibility

Would she genuinely have a chance of getting a mortgage if she only starts work in June 2021? I thought ou would need to be working for at least a couple of years before being eligible for  a mortgage. 

If she actually has work lined up then yes it is possible.  There are lenders like the Teachers Building Society who will lend way ahead on future income for teachers.  And then high street lenders who will only need a single payslip or a start date.   
Adverse lenders tend to want 12 months employment history but majority of the prime high street lenders arent as fussy

Thrugelmir

Irishresident said:

Are there any groups/organisations that specialise in drawing up such contracts between parents and their children (BOMAD)? Are their any groups /organisations that specialise in advising parents and children in such circumstances?




 

The relationship between you is irrelevant.  The issue is drafting a water tight legal agreement that protects both parties interests. The fees you quoted will include VAT charged of 20%. 

getmore4less

How much under £200k?

cost + fees salary needed for 4.5x with 1/3 down
£210 ==  £31.1k
£180 == £26.7k
£150 == £22.2k

Presumably the other owners do want to sell

Irishresident

Thrugelmir said:

Irishresident said:

Are there any groups/organisations that specialise in drawing up such contracts between parents and their children (BOMAD)? Are their any groups /organisations that specialise in advising parents and children in such circumstances?




 

The relationship between you is irrelevant.  The issue is drafting a water tight legal agreement that protects both parties interests. The fees you quoted will include VAT charged of 20%. 

Does the £1500 to £1800 seem reasonable for drawing up such a contract and registering the change with the Land Registry?

Irishresident

getmore4less said:

How much under £200k?

cost + fees salary needed for 4.5x with 1/3 down
£210 ==  £31.1k
£180 == £26.7k
£150 == £22.2k

Presumably the other owners do want to sell

My brothers are happy to sell the property for £150K

Thrugelmir

Irishresident said:

Thrugelmir said:

Irishresident said:

Are there any groups/organisations that specialise in drawing up such contracts between parents and their children (BOMAD)? Are their any groups /organisations that specialise in advising parents and children in such circumstances?




 

The relationship between you is irrelevant.  The issue is drafting a water tight legal agreement that protects both parties interests. The fees you quoted will include VAT charged of 20%. 

Does the £1500 to £1800 seem reasonable for drawing up such a contract and registering the change with the Land Registry?

Solicitors are not cheap. Running an office is an expensive business. Your daughter may well be recommended to seek independent legal advice as well. To ensure that she understands the agreement she is going to sign. 

Irishresident

Thrugelmir said:

Irishresident said:

Thrugelmir said:

Irishresident said:

Are there any groups/organisations that specialise in drawing up such contracts between parents and their children (BOMAD)? Are their any groups /organisations that specialise in advising parents and children in such circumstances?




 

The relationship between you is irrelevant.  The issue is drafting a water tight legal agreement that protects both parties interests. The fees you quoted will include VAT charged of 20%. 

Does the £1500 to £1800 seem reasonable for drawing up such a contract and registering the change with the Land Registry?

Solicitors are not cheap. Running an office is an expensive business. Your daughter may well be recommended to seek independent legal advice as well. To ensure that she understands the agreement she is going to sign. 

I fully accept that solicitors are not cheap, but does that sound to you like a reasonable sum for such a service or should I shop around more? The service I have received from them so far has been timely and professional. If the fee is in-line with what I would pay elsewhere then I am happy to pay it. If it is wildly over the top then I will look elsewhere.