Lifetime Mortgage in order to provide "bank of mum and dad" help with first house purchase

[Deleted User]

Have you considered offering to have the lender take a charge against your property in order to provide a non cash deposit?
Or a retirement interest only mortgage rather than a LM mortgage?  That avoids the interest roll up then.

MWT

reheat said:

I'm not sure if having rolled up interest deducted out of a future inheritance counts as our son and Dil being required to pay interest or not.

You are still over-thinking this.

As long as you can sign a document confirming that the money is a gift without reservations and not a loan, the lender will be happy.

How you determine to dispose of your estate in your will is of no interest to the lender.

Frankly I would be more concerned about you making sure your own finances are in good order for your planned house move and retirement as your first priority, then see what, if anything, you can afford to contribute to your children's efforts to buy property if that is what you still want to do.

It doesn't feel like your son actually needs the help if he has already pulled together a deposit over 10% of his likely purchase.

This is not the last time he will be buying a house I'd guess, and right now the timing isn't right for you either.

Get your house move out of the way, get a clear picture of your retirement income then see if there is room to help in the future, or determine that you'd be best keeping your options open to supplement your own needs in the future...

reheat

getmore4less said:

You need to stop calling it a loan if you want any lender to agree to give them money

IT's a gift you can't afford without putting your house on the line(50% of it)  is that a problem?
if it is don't do it.

Why not go all the way as long as you get to keep your house borrow to the max with a no negative equity clause and gift the lot 50:50 to your kids and let them decide how to spend the money no rather than waiting till you die to maybe get something.

The money I'm talking about would be a loan to my wife and I, so there is no point giving any other name. But we would be doing this in order to give it to our son and Dil, albeit it - along with interest accrued - would come out of their inheritance in the end. But you are right - need to be be careful to avoid calling it a loan being made to our son and Dil. Truth is I don't know what an advance on inheritance it would be classed as technically, especially when interest, not just capital, is eventually deducted from a house sale that would form the major part of their inheritance.

Out daughter's circumstances are very different, single mum with two young children. Giving money to her now would be hugely counter productive, and would screw up her benefits completely. So no, not an option at this time.

reheat

Deleted_User said:

Have you considered offering to have the lender take a charge against your property in order to provide a non cash deposit?
Or a retirement interest only mortgage rather than a LM mortgage?  That avoids the interest roll up then.

What is a non-cash deposit? Or is that where our lender paid directly into our son and Dil's house purchase?

No, dismissed the idea of a RIO mortgage, because my wife and I would then be at risk of repossession if any defaulting of repayments; a risk we could not countenance. And being we could not afford the repayments in retirement it would be our son and Dil obliged to pay them, so the same as them taking out an interest only mortgage themselves. No way we could ever deem it a gift to them in that case.

reheat

MWT said:

reheat said:

I'm not sure if having rolled up interest deducted out of a future inheritance counts as our son and Dil being required to pay interest or not.

You are still over-thinking this.

As long as you can sign a document confirming that the money is a gift without reservations and not a loan, the lender will be happy.

How you determine to dispose of your estate in your will is of no interest to the lender.

Frankly I would be more concerned about you making sure your own finances are in good order for your planned house move and retirement as your first priority, then see what, if anything, you can afford to contribute to your children's efforts to buy property if that is what you still want to do.

It doesn't feel like your son actually needs the help if he has already pulled together a deposit over 10% of his likely purchase.

This is not the last time he will be buying a house I'd guess, and right now the timing isn't right for you either.

Get your house move out of the way, get a clear picture of your retirement income then see if there is room to help in the future, or determine that you'd be best keeping your options open to supplement your own needs in the future...

Yes, I'm afraid over thinking is a known trait of mine .

"It doesn't feel like your son actually needs the help if he has already pulled together a deposit over 10% of his likely purchase." The main problem here is what our son's lenders are prepared to lend, based on his salary (at this time it can only be him that works). The max they will lend him is around £165k, so with their £20k that means looking for a house in Sussex for no more than £185k. There is nothing that would be vaguely suitable in Sussex, including commute to his work, for that sort of money. So they need a boost to their initial purchasing power.

getmore4less

reheat said:

getmore4less said:

You need to stop calling it a loan if you want any lender to agree to give them money

IT's a gift you can't afford without putting your house on the line(50% of it)  is that a problem?
if it is don't do it.

Why not go all the way as long as you get to keep your house borrow to the max with a no negative equity clause and gift the lot 50:50 to your kids and let them decide how to spend the money no rather than waiting till you die to maybe get something.

The money I'm talking about would be a loan to my wife and I, so there is no point giving any other name. But we would be doing this in order to give it to our son and Dil, albeit it - along with interest accrued - would come out of their inheritance in the end. But you are right - need to be be careful to avoid calling it a loan being made to our son and Dil. Truth is I don't know what an advance on inheritance it would be classed as technically, especially when interest, not just capital, is eventually deducted from a house sale that would form the major part of their inheritance.

Out daughter's circumstances are very different, single mum with two young children. Giving money to her now would be hugely counter productive, and would screw up her benefits completely. So no, not an option at this time.

In reality there is no such thing as advance on inheritance. you are just giving away money,  in this case money you don't have.


What you are doing is borrowing money against your house to gift,  it is not a loan.


How you dish out what you have left at the end is totally separate although you can adjust the distribution to take account of previous gifts however you want.

Don't forget the issue over current/future value 
Borrowing money now to give away is worth a lot more to the person you give it to bow than some similar amount given to someone else in say 20 years time.

a bit of interest won't cover the value of that difference.

reheat

getmore4less said:

In reality there is no such thing as advance on inheritance. you are just giving away money,  in this case money you don't have.


What you are doing is borrowing money against your house to gift,  it is not a loan.


How you dish out what you have left at the end is totally separate although you can adjust the distribution to take account of previous gifts however you want.

Don't forget the issue over current/future value 
Borrowing money now to give away is worth a lot more to the person you give it to bow than some similar amount given to someone else in say 20 years time.

a bit of interest won't cover the value of that difference.

Yes, that makes sense. I reckoned that if my wife and I got a LM for 3%, then it would take 23 years for the interest on that to double the amount owed. Unless the property market behaved very differently, I find it hard to believe our son and Dil's £50k additional equity would not perform much better than that. And given that they both escalate in parallel, it would not be disastrous even if one of us stays fit as a fiddle for ages.

reheat

But I am coming to the conclusion, from what I am learning in this thread, and also from talking to a couple of LM people, that £50k may be more than makes sense, especially with wanting a 50% inheritance protection. We could still give our son and Dil a reasonable boost with 30~40k, but the lower LTV would give a better interest rate on our LM, so less to roll up and be taken from their inheritance at end. 

But as has already been said, none of this can be pinned down to any detail at this time, only once we ourselves have moved and got to better known circumstances. Need to understand the feasibility (or not) well enough now, as it would be nice to be able to offer a bit of hope to our son and Dil (albeit clarifying no way a promise) for not too far in the future, in what currently seems like a rather hopeless situation for them. My wife and I know it well. We bought our first house soon after we were married, and although very challenging for us at the time, it was at least feasible. Our son and Dil are in a similar place in their lives, except far less viability for a property purchase.

mark55man

sorry late to the conversation, and thanks everyone for the education about a range of products I hadn't considered

this thread strikes a chord as I have kids all in the early 20s, so some earlier fecclessness (sic - to avoid the !!!! of shame) I am not sure I can provide as much help to my kids in this respect as I would have liked, as (see signature) I am clearing my last credit card (this year) and mortgage  (three years to a mortgage neutral pot, 6 years before paid off).  

That said, I think you are putting your whole retirement at risk just to help you DS get a foot up on the ladder.  I think that is a step too far and he just needs to rent/wait a bit longer, and save a bit harder.  I do see myself helping before legacy, but not in the short term

of all the options discussed, the least worst seems to be gathering up an extra boost (eg from savings, from taking tax free lumpsum from your pension pots) but that lump sum won't leverage them up too far in terms of property given their max loan figure - but would improve LTV and mortgage rate.  Seriously the best thing they could do is work on getting a bit more salary in, that with a top up from mum and dad would clinch it I'm sure.  

I do know Sussex (have relatives there), and my final observation was are they looking in too nice an area, there are a lot of cheaper areas so could they lower their sights a little to get on the ladder - and then improving their position is their problem not yours

reheat

@MWT:
"As long as you can sign a document confirming that the money is a gift without reservations and not a loan, the lender will be happy.
How you determine to dispose of your estate in your will is of no interest to the lender."
Yes, sounds good. Would this still leave the option open for our son and Dil to still voluntarily pay some of our LM off along the way if they wished, in order to reduce what gets deducted from their inheritance at the end, or would that complicate things again? It feels like that would be an ancillary issue so far as their lender would be concerned, but not sure. Also not sure if that would be deemed payments to my wife and I, and therefore some tax implications. 

"Frankly I would be more concerned about you making sure your own finances are in good order for your planned house move and retirement as your first priority, then see what, if anything, you can afford to contribute to your children's efforts to buy property if that is what you still want to do.
...
Get your house move out of the way, get a clear picture of your retirement income then see if there is room to help in the future, or determine that you'd be best keeping your options open to supplement your own needs in the future..."
Yes, fully agree. I'm just trying to understand at this time whether these things could be feasible in principle, or not worth discussing further.