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Advice re helping family members

My kids are graduating / just graduated and facing what we all know , higher house prices, lack of houses etc., but I think much worse than before, plus near impossible to get decent tenancy at a good price.

I will help them with a gift towards costs and deposit etc., but even then they are struggling to get enough mortgage. So, I want to do more, I want to give them equity loans a bit like Target HCA, where I own 10-20% of the property. Unlike target I don’t want to charge my kids interest after 5 years or have overly beauacratic costly process to exit/repay, then can just repay the equity when they sell or if their earning rise significantly before, but I do want to structure it properly and legally so will likely need a charge put on the property in my name ?

Can anyone advise how to set this up and if the mortgage companies generally allow it ?


Has anyone done this kind of thing ?

Or any other options

Thanks


.


The greatest prediction of your future is your daily actions.
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Comments

  • [Deleted User]
    [Deleted User] Posts: 3,297 Forumite
    1,000 Posts Fourth Anniversary Photogenic Name Dropper

    My kids are graduating / just graduated and facing what we all know , higher house prices, lack of houses etc., but I think much worse than before, plus near impossible to get decent tenancy at a good price.

    I will help them with a gift towards costs and deposit etc., but even then they are struggling to get enough mortgage. So, I want to do more, I want to give them equity loans a bit like Target HCA, where I own 10-20% of the property. Unlike target I don’t want to charge my kids interest after 5 years or have overly beauacratic costly process to exit/repay, then can just repay the equity when they sell or if their earning rise significantly before, but I do want to structure it properly and legally so will likely need a charge put on the property in my name ?

    Can anyone advise how to set this up and if the mortgage companies generally allow it ?


    Has anyone done this kind of thing ?

    Or any other options

    Thanks


    .


    You owning part of the property will attract the higher rate of SDLT on the purchase.  Although you then go on to talk about putting a charge on the property so which is it, are you going to jointly own the property with your children or are you going to lend them the money and secure the loan with a charge against the property?
  • user1977
    user1977 Posts: 18,359 Forumite
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    edited 30 July 2021 at 12:05PM
    Do you need/expect to get the money back? Much simpler just to gift - generally lenders don't like other loans being involved in making up the price, and having a stake in the equity makes things even more complicated. Though if you can give/lend them enough that they don't need to use another lender, you can structure it how you want.
  • steampowered
    steampowered Posts: 6,176 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 30 July 2021 at 1:00PM
    I think it is a bad idea for your kids to buy a property so soon after graduation:

    1) Owning a property ties them down and will restrict their opportunities. It is really important for graduates to be able to move around the country to get the best job opportunities.

    2) They are more likely to make an expensive mistake as they are inexperienced. Let them get used to independent living by renting, so they can work out what they want and don't want in a property, and where they want to live.

    3) Their salary will be low on graduate schemes, so they are unlikely to be able to get a decent sized mortgage. They will be able to buy a much better property if they just wait a few years by which time their salary will have increased.

    4) Buying a property now can be a waste if they are just going to want to move again in the next few years. It wastes conveyancing fees. It wastes first time buyer stamp duty relief. It wastes the £1000 per year bonus which the government will give your kids each year to put towards a property f they make the most of their Lifetime ISA allowance (have a read of the MSE guide to Lifetime ISAs). These costs are likely to exceed a few years of rent. 

    5) It sounds like your kids will be getting the biggest mortgage possible. If they wait to save a proper deposit, they will get a better rate - which means less money wasted in interest. 


    Number 1 is by far the biggest issue for me. Owning a property prematurely can really damage young people's life opportunities if it stops them moving somewhere else for a better job. 
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 878 Forumite
    Part of the Furniture 500 Posts Photogenic Name Dropper
    edited 30 July 2021 at 2:06PM

    My kids are graduating / just graduated and facing what we all know , higher house prices, lack of houses etc., but I think much worse than before, plus near impossible to get decent tenancy at a good price.

    I will help them with a gift towards costs and deposit etc., but even then they are struggling to get enough mortgage. So, I want to do more, I want to give them equity loans a bit like Target HCA, where I own 10-20% of the property. Unlike target I don’t want to charge my kids interest after 5 years or have overly beauacratic costly process to exit/repay, then can just repay the equity when they sell or if their earning rise significantly before, but I do want to structure it properly and legally so will likely need a charge put on the property in my name ?

    Can anyone advise how to set this up and if the mortgage companies generally allow it ?


    Has anyone done this kind of thing ?

    Or any other options

    Thanks


    .


    You owning part of the property will attract the higher rate of SDLT on the purchase.  Although you then go on to talk about putting a charge on the property so which is it, are you going to jointly own the property with your children or are you going to lend them the money and secure the loan with a charge against the property?
    I dont know, what are the pros and cons of each approach ?

    I mentioned the charge because thats how target HCA do it and thought I would something similar but less beauracratic and without all thier fees

    I came for advice
    The greatest prediction of your future is your daily actions.
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 878 Forumite
    Part of the Furniture 500 Posts Photogenic Name Dropper
    edited 30 July 2021 at 1:54PM
    I think it is a bad idea for your kids to buy a property so soon after graduation:

    1) Owning a property ties them down and will restrict their opportunities. It is really important for graduates to be able to move around the country to get the best job opportunities.

    2) They are more likely to make an expensive mistake as they are inexperienced. Let them get used to independent living by renting, so they can work out what they want and don't want in a property, and where they want to live.

    3) Their salary will be low on graduate schemes, so they are unlikely to be able to get a decent sized mortgage. They will be able to buy a much better property if they just wait a few years by which time their salary will have increased.

    4) Buying a property now can be a waste if they are just going to want to move again in the next few years. It wastes conveyancing fees. It wastes first time buyer stamp duty relief. It wastes the £1000 per year bonus which the government will give your kids each year to put towards a property f they make the most of their Lifetime ISA allowance (have a read of the MSE guide to Lifetime ISAs). These costs are likely to exceed a few years of rent. 

    5) It sounds like your kids will be getting the biggest mortgage possible. If they wait to save a proper deposit, they will get a better rate - which means less money wasted in interest. 


    Number 1 is by far the biggest issue for me. Owning a property prematurely can really damage young people's life opportunities if it stops them moving somewhere else for a better job. 


    Thanks but I disagree , I know our sitatuation better than you.

    I came for advice on the subject topic not for advice about wherher to buy property or not, that decision is made 
    The greatest prediction of your future is your daily actions.
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 878 Forumite
    Part of the Furniture 500 Posts Photogenic Name Dropper
    edited 30 July 2021 at 2:01PM
    user1977 said:
    Do you need/expect to get the money back? Much simpler just to gift - generally lenders don't like other loans being involved in making up the price, and having a stake in the equity makes things even more complicated. Though if you can give/lend them enough that they don't need to use another lender, you can structure it how you want.
    ThanksI thought gift would be the easier

    I dont need no, but expect yes, its too much on top of everything I have done for them already, they need to be taking some risks themselves! I wanted it to be more fomal like a business deal/joint investment, we have done similar for cars and travel and they always pay me back but this is much more long term so id like some insurance. But I think you are right, a loan is probably best. Thanks

    The only downside is, and I have done this before in the past, lenders have to do proof of funds and in the process will make me sign to say its a non-refndable gift, even though its not, feels wrong. I did it 20 years ago and the lender diddnt do this but the solicitor did the opposite, got a document to say I was entitled to the money back on the sale

    The greatest prediction of your future is your daily actions.
  • user1977
    user1977 Posts: 18,359 Forumite
    10,000 Posts Seventh Anniversary Photogenic Name Dropper
    user1977 said:
    Do you need/expect to get the money back? Much simpler just to gift - generally lenders don't like other loans being involved in making up the price, and having a stake in the equity makes things even more complicated. Though if you can give/lend them enough that they don't need to use another lender, you can structure it how you want.
    The only downside is, and I have done this before in the past, lenders have to do proof of funds and in the process will make me sign to say its a non-refndable gift, even though its not, feels wrong.
    That's because it is wrong - you (and your family member) would be committing mortgage fraud by doing that.
  • user1977 said:
    user1977 said:
    Do you need/expect to get the money back? Much simpler just to gift - generally lenders don't like other loans being involved in making up the price, and having a stake in the equity makes things even more complicated. Though if you can give/lend them enough that they don't need to use another lender, you can structure it how you want.
    The only downside is, and I have done this before in the past, lenders have to do proof of funds and in the process will make me sign to say its a non-refndable gift, even though its not, feels wrong.
    That's because it is wrong - you (and your family member) would be committing mortgage fraud by doing that.
    Yep agreed. Ive just seen Nationwide do a repayable gift product,this may be better

    The greatest prediction of your future is your daily actions.
  • MalMonroe
    MalMonroe Posts: 5,783 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper Photogenic
    When my daughter graduated the last thing she wanted was property. She said she didn't want to be tied down and felt it would be a millstone around her neck, she wanted freedom, especially after having studied hard for so many years. She wanted and needed a break from responsibility of all kinds. The idea of being tied to a property immediately after graduation filled her with horror. She was born abroad and has dual nationality so when coronavirus permits she wants to go and visit and live in her 'other' country for a while without the encumbrances of home ownership.

    You say 'that decision is made' but by whom? Your kids? Is property ownership really what they want?  They must be 21 plus, which means they are adults and should be making their own big decisions in life. It's great when parents want to help their children financially, I do it whenever I can but to buy them properties? No.  
    Please note - taken from the Forum Rules and amended for my own personal use (with thanks) : It is up to you to investigate, check, double-check and check yet again before you make any decisions or take any action based on any information you glean from any of my posts. Although I do carry out careful research before posting and never intend to mislead or supply out-of-date or incorrect information, please do not rely 100% on what you are reading. Verify everything in order to protect yourself as you are responsible for any action you consequently take.
  • MWT
    MWT Posts: 10,395 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 30 July 2021 at 2:53PM
    MalMonroe said:
    You say 'that decision is made' but by whom? Your kids? Is property ownership really what they want?  They must be 21 plus, which means they are adults and should be making their own big decisions in life. It's great when parents want to help their children financially, I do it whenever I can but to buy them properties? No.  
    I think the OP has made their position very clear on this point, it was wrong for your daughter, it was very right for me, and we should do the OP the courtesy of accepting that they have reached their decision, and either respect that then offer advise on how to proceed, or perhaps move on to a different thread...

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