Helping my son buy a home

fullofcold

I just have a quick question which is not pending yet but something I am considering upon inheritance.

 

If I bought a property with my son cash but wanted him to pay me a monthly ‘mortgage payment’ – so essentially I am gifting him some money but lending him the rest like a mortgage (and do expect to charge a low rate for the life of the mortgage) is this something that you can be drawn up legally?  Also would I then just complete a TR1 once the ‘mortgage’ is discharged.

 

The other question I suppose I should ask is if I died during the term of the ‘mortgage’ can I get it written in my will that the debt is forgiven or would I be better off writing life insurance for me in trust to my son to repay the balance of the mortgage at the time?

I know this is if's but's and maybe's at the moment but it is highly likely that I am going to inherit a substantial amount and I know he will struggle to get on the housing ladder without substantial help - plus he's my boy and I want to help him as much as possible without handing everything to him on a plate.

 

steampowered

What you are really doing is making a loan to your son.

You could have a short loan agreement which says that your son must pay £xxxx per month at xx% interest rate until the debt is paid off, but the debt will be written off if you pass away.

getmore4less

if you are a joint owner that won't be living there then you have to consider  SDLT and CGT


Also any interest on the loan will be taxable income for you(easy to fix) 


Probably easier to have son by the house with part gift part interest free loan.

if you want to protect the loan have a charge on the property


You can have whatever terms you like for the loan as long as they are sufficient to enforce in a can't pay won't pay situation.


Loan can be written off any time,  before death it becomes another gift at death its an inheritance.

TBagpuss

Yes, you can make a private loan to your son.
You can have this properly drawn up and secured against the property like any other mortgage, or you an have it as an unsecured laon.

Either way, get proper advice 

You can also include in your will provision for any remaining debt to be forgiven - I am not sure if that would be effective if your estate was insolvent (or likely to be insolvent if they debt were not repaid) but otherwise you are effectively giving him a legacy equal to the outstanding debt . 

It would be possible for you and your son to own the property jointly and yo have an arrangement whereby you gifted him half and then he bought the other half off you by installments, If you owned as Joint tenants he would automatically own the whole thing on your death.

However, assuming you own another property, you would pay the extra stamp duty n buying the property and you would also have CGT to pay when the property was transferred to your son, so him buying the property and you lending him some of the money to do so is probably a better option

fullofcold

Thank you all - you're right the better option is a charge on the property instead of joint ownership and an agreement drawn up to repay the 'mortgage' by him.  I think I was overcomplicating things in my head.

*Also any interest on the loan will be taxable income for you(easy to fix)*  this is also a good point and in reality it is highly likely I am not going to need the interest as the only reason I am doing this is to help him out as opposed to gain.

getmore4less

fullofcold said:

Thank you all - you're right the better option is a charge on the property instead of joint ownership and an agreement drawn up to repay the 'mortgage' by him.  I think I was overcomplicating things in my head.

*Also any interest on the loan will be taxable income for you(easy to fix)*  this is also a good point and in reality it is highly likely I am not going to need the interest as the only reason I am doing this is to help him out as opposed to gain.

where there is a gift and a loan you adjust the size of each to get the balance you want.

eg £100k  £40:£60 but you need the £60k paid back at say 2% over 10years

rather than loan £60k at £500pm  you need £552pm

lending  £66,240  (its actually £552.08/£66,259.60 )  there is no interest