Helping my son buy a house

Kismet_Hardy

My husband and I are midway through the process of helping our son buy his first property. Like you, we are taking out a mortgage on our house, which means we are getting a very good rate. There is no way he could buy if we weren't able to do this.

The house will be in his sole name, which is important to us, and not only because of the SDLT etc which would arise if we were part owners. We hope he can build up some decent equity which will enable him to take out his own mortgage in 5 to 8 year's time.

We are having a charge put on the property and I would urge you to have the matter sown up legally. There is some extra expense in instructing our own solicitors to draw up an agreement between us, but it does mean that we all know exactly where we stand and everyone's interests are protected, including our two younger children. 

Kismet_Hardy

Apologies - I need to add that he will be paying the installments due under the mortgage. He can overpay by up to 10% per year and we shall be encouraging him to try to make some over-payments if he can, once he has settled in (and is used to paying his own way!) 

letsbetfair

feelingsuelawley said:

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.

Yeah - if you're happy lending the full purchase price, your son won't need a guarantor mortgage. Unless it's a very cheap property, lending the full purchase price will likely be cheaper than a guarantor mortgage overall (because you'll pay less interest than he would) even after you've paid a solicitor to formalise things and put a charge on the property. The downside of lending the full amount is that the money is tied up and there's some risk, of course, but assuming you're ok with that it could be a good approach.