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Considering buying a flat for our son's university years

Seeking advice from the collective wisdom of the community...
Our son is in his first year of uni in Glasgow (albeit not having yet attended a live lecture and currently studying from home). In the expectation that by the autumn life will be more 'normal', we will be needing to arrange digs for his remaining 3 years.
Rent would be around £600/month, so we're considering helping him buy a flat instead (one bed, price around £120k). He has £30k from an inheritance and we would raise the rest by remortgaging our house (LTV would still be well below 50% even with the additional borrowing). This would be passed to him as an interest free loan making him a cash buyer. I know that there would be costs at both ends (mortgage fees, conveyancing, selling fees etc.) which we would pay for, but my sums suggest it would still all be cheaper than throwing £20k away on rent.
Being in his name, there'd be no stamp duty to pay (or CGT in the happy event of a huge market boom though our forecasts are assuming no change in value). Should the market drop, we would take the hit (this is the only downside we can think of).
Plan A is to sell when he graduates, he gets his £30k back + any gains, and returns the balance (less selling costs) to us. Alternatively if he gains a Glasgow job and wants to keep the flat he could get a mortgage to pay us back our contribution.
Are there holes in this idea that I haven't thought of? Might he lose access to first time buyer rates or other facilities?
Thanks for any opinions!
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Replies

  • K_SK_S Forumite
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    Peterrr said: 
    Might he lose access to first time buyer rates or other facilities?
    Thanks for any opinions!
    @peterrr I wouldn't worry too much about lender FTB incentives, in my experience they're rarely material.

    The FTB facilities that may be worth a lot of money are all the government backed ones, those are the only ones I'd take into consideration.

    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

  • ThrugelmirThrugelmir Forumite
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    Saving £20k sounds somewhat optimistic.  Given the rent projection for the 3 years is only £21,600. 
    It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." — George Soros
  • DensolDensol Forumite
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    I think its a great idea ! 
  • PeterrrPeterrr Forumite
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    Saving £20k sounds somewhat optimistic.  Given the rent projection for the 3 years is only £21,600. 
    Thanks, though I didn't mention nor have any expectation to save that - we hope that we might save a few £000s
  • Voyager2002Voyager2002 Forumite
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    Most of the really serious risks depend on your son: things like trashing the flat or allowing someone to live there who then becomes a sitting tenant. And of course if he decides he does not like the flat or the area then he is really stuck.

    Perhaps the most probable downside: he graduates and gets a job in another place but in the short term cannot sell the flat. Meanwhile, he needs money for rent; for a deposit on a place to live; perhaps for a work suit and car, while his inheritance is tied up in the flat...
  • PeterrrPeterrr Forumite
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    Appreciate the thoughts so far folks - happily he is very sensible, and given his inheritance money would be tied up in the flat, we have no concerns about him trashing it. Hopefully a city centre flat in walking distance of the universities and offices will always have a market, but my wife and I would assume any downside risk along with all costs for the duration (given we would otherwise be paying the rent and related costs anyway). Hopefully in 3 years we would either sell and realise a lower net spend, or our son takes it on if he wants, without paying for conveyancing. Either way he will have enjoyed his own city centre flat for the interim and may even enjoy some value appreciation.
  • BookmobileBadGirlBookmobileBadGirl Forumite
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    Part of university is meeting people and socialising, he hasn’t had that opportunity (much) in the first year. I would be worried about missing out on that by living in a one bedroom flat
    Currently (02/06/2021) £47,050
    Aim (05/11/2021) £50,000 Aim (Jan 22) £35,000

    Mortgage - Shared Ownership 25% £75,300
    Mortgage Free Date December 2051 December 2040
  • The more common route here is to buy a HMO and he effectively sources your other HMO occupants and it is somewhat self policing by virtue of his ownership.  Also stops him being billy no mates.  
    Scottish law is indeed different for the purchase process (although you have not stated your domicile)
    They key is his uni experience, not making/saving a couple thousand
  • dimbo61dimbo61 Forumite
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    No changed my mind please buy a 2 bed flat to give Son and a friend somewhere to stay rather than consider a HMO in Glasgow, Scotland.
    Not sure of the licence requirements but this is one hell of an undertaking to buy the right property in the right place and get it to full HMO standards. Room size, fire safety, EICR GSC EPC PAT testing and legionnaires checks.
    It's a job and requires huge investment.
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