Helping my son buy a house

feelingsuelawley

My spouse and I own our house outright as tenants in common. We would like to help our son buy his first house. He would be moving in with his partner (not married, no children).

My current plan is to take out a new mortgage on our property (likely only about 25% LTV) and use this to buy the new house outright with cash.

He & his partner would then pay us a monthly figure equivalent to repayment of the mortgage on our home.

I think that part of the plan is fairly solid (but am happy to be corrected).

The part I'd like your views on especially is how to structure ownership of the new house. I am aware I am allowed to gift him upto the full value of the house, effectively allowing him to own it in full, or to own jointly with his partner (as JT or TiC) as he sees fit.

Or I could structure it so ownership is shared as JT between me, my spouse, him and his partner in any defined proportions.

What would the recommendation be in this regard? Essentially I'm looking for objective advice on how I should share ownership between the 4 parties in a way that treats him and his partner fairly without excessive risk to my capital or cashflow in the event their relationship ends.

And, irrespective of how I document the ownership at point of purchase, how will the law view this in the future depending on the % contributions made to the repayments by him & his partner (eg, would a 25/25/25/25 JT split be deemed as something else in 5 years of repayments have been 80/20 in favour of one party or another)?

AdrianC

If you and/or your spouse have any ownership, +3% SDLT will be payable.

It would seem to me that the most sensible way to do this would be to loan them the money, with a charge against the property, and them as owners. That way, it's their house, they simply owe you the money.

How formally you want to document the loan agreement is up to you.

feelingsuelawley

That's a fine point, thank you.

Alternatively, I try and complete the purchase before the end of September, since the purchase price will be below £250k

AdrianC

feelingsuelawley said:

That's a fine point, thank you.

Alternatively, I try and complete the purchase before the end of September, since the purchase price will be below £250k

The +3% would still apply.

grumiofoundation

feelingsuelawley said:

That's a fine point, thank you.

Alternatively, I try and complete the purchase before the end of September, since the purchase price will be below £250k

Even if you can which will be a push, as above, the +3% is separate from the stamp duty holiday so will be due. 


Is there actually any reason why you want to own the property? As opposed to a loan/gift to them?

feelingsuelawley

grumiofoundation said:

Is there actually any reason why you want to own the property? As opposed to a loan/gift to them?

I don't think so, It's not a must have - more an assumption that I am entirely happy to have challenged. Other than SDLT are there other pros & cons to the loan/gift route?

[Deleted User]

feelingsuelawley said:

grumiofoundation said:

Is there actually any reason why you want to own the property? As opposed to a loan/gift to them?

I don't think so, It's not a must have - more an assumption that I am entirely happy to have challenged. Other than SDLT are there other pros & cons to the loan/gift route?

Capital Gains Tax.  Maintenance and repairs.  Your son and his partner feeling like it's their home.

GrumpyDil

Yes. If you own a share of the property, as you will not be living there, any gain in relation to your share would be liable to CGT.

greensalad

Could you look into the family help type mortgages? 

There is the Barclays Springboard Mortgage where you can put a lump sum equivalent to 20% of the property price in a separate Barclays account (still in your name). Barclays will then use this as the guarantee for the mortgage and your son and partner can have a full mortgage of their own. After 5 years when the mortgage initial term ends, you get your money back with interest.

There is also the Lloyds Lend A Hand mortgage which is the same but 3 years and 10% down in the separate account.

Nationwide has one for a situation where you have a Nationwide mortgage and are willing to essentially do as you intend, take out a mortgage on your current property to be used as collateral.

Here's a link on all these mortgages: https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/guarantor-mortgages-a3x5g1h6fw2x

There are many of these types of products around and it may be easier to use one of them than have to go to the extra expense of getting solicitors to draw up specific legal contracts between you and your son.

letsbetfair

It sounds like you want the arrangement to work like a loan - they pay you a set amount each month until the mortgage is paid off or you decide to write off the loan? If so, why not just do this as a loan - anything else just complicates matters. You could do it formally with a charge on the house if you wanted. You wouldn't be able to access the money quickly if your son stopped paying the loan, but the same applies to pretty much any other arrangement too.

If you want this not to work like a loan, can you articulate in what ways?

feelingsuelawley

letsbetfair said:

It sounds like you want the arrangement to work like a loan - they pay you a set amount each month until the mortgage is paid off or you decide to write off the loan? If so, why not just do this as a loan - anything else just complicates matters. You could do it formally with a charge on the house if you wanted. You wouldn't be able to access the money quickly if your son stopped paying the loan, but the same applies to pretty much any other arrangement too.

If you want this not to work like a loan, can you articulate in what ways?

I think that's a very fair analysis and to answer your final question, no I can't really articulate the ways in which I want it to work NOT like a loan, it just hadn't occurred to me that it was what I was describing, if you see what I mean!

Really appreciate all the advice and guidance offered here today.

My main issue is that guarantor mortgages seem to be a dying commodity, although they are resurfacing under names like Lend A Hand or Springboard. Although, as the suggestions seem to be, if I go down the loan route it's irrelevant.

Lover_of_Lycra said:

Your son and his partner feeling like it's their home.

That's a good point, too. My parents helped me get on the property ladder many years ago but there was always a sense that it was their home/their money that I just providing a convenient outlet for, rather than offered openly. Keen to avoid repeating that but wasn't sure what good looked like. This thread has been very helpful in that regard.