Renting joint inherited property to daughter

Anntay550

Thank you everyone for all of your comments. They have all been very helpful, and helped us to direct our thoughts constructively.

We plan to rent the house to my daughter for less than the market rate in order to allow her to save towards a mortgage deposit. 

The problem for her at the moment is that she has two part time jobs. One is on a permanent contract and the other is currently on a 6 month temporary basis with the prospect of a full time job in the spring - she wishes to wait until she has a full time job before applying for a mortgage and is aware that she would need to be in the position for  6 months before her application. These are uncertain times, of course, and there is no guarantee. 

Thank you Canaldumidi for your extensive answer. There is a lot of useful information there, which is all very useful. The inherited property is mortgage free by the way.

There is still much to think about, and my brother’s and I will need to have many further discussions, between ourselves and with my daughter.

Thank you again for all your comments so far, they have been invaluable

rexmedorum

Anntay550 said:

Thank you everyone for all of your comments. They have all been very helpful, and helped us to direct our thoughts constructively.

We plan to rent the house to my daughter for less than the market rate in order to allow her to save towards a mortgage deposit. 

The problem for her at the moment is that she has two part time jobs. One is on a permanent contract and the other is currently on a 6 month temporary basis with the prospect of a full time job in the spring - she wishes to wait until she has a full time job before applying for a mortgage and is aware that she would need to be in the position for  6 months before her application. These are uncertain times, of course, and there is no guarantee. 

Thank you Canaldumidi for your extensive answer. There is a lot of useful information there, which is all very useful. The inherited property is mortgage free by the way.

There is still much to think about, and my brother’s and I will need to have many further discussions, between ourselves and with my daughter.

Thank you again for all your comments so far, they have been invaluable

if the precarious job situation is the issue there are mortgage constructs where parents can be guarantors. Could she borrow part of the deposit from you? Or if you don't have the money could she borrow it from all of you, to pay the other siblings back after completion (when you get your share of the money)?

Just asking as paying tax on the rent and then capital gains when you do sell seems like a waste of money your family could legally avoid. Also if prices rise the deposit required will rise along with it!

Anntay550

rexmedorum said

if the precarious job situation is the issue there are mortgage constructs where parents can be guarantors. Could she borrow part of the deposit from you? Or if you don't have the money could she borrow it from all of you, to pay the other siblings back after completion (when you get your share of the money)?

Just asking as paying tax on the rent and then capital gains when you do sell seems like a waste of money your family could legally avoid. Also if prices rise the deposit required will rise along with it!

There are some good points here.Thank you

MaryNB

Anntay550 said:

rexmedorum said

if the precarious job situation is the issue there are mortgage constructs where parents can be guarantors. Could she borrow part of the deposit from you? Or if you don't have the money could she borrow it from all of you, to pay the other siblings back after completion (when you get your share of the money)?

Just asking as paying tax on the rent and then capital gains when you do sell seems like a waste of money your family could legally avoid. Also if prices rise the deposit required will rise along with it!

There are some good points here.Thank you

I'm not sure if there are any lenders that will accept a borrowed deposit. If they do it would reduce how much she could borrow because it's a significant loan she has to pay back while repaying the mortgage.

The standard for most lenders is that any deposit given to her has to be given as a gift without any strings attached - doesn't have to be repaid and the person gifting it won't retain any interest in the house. 

Anntay550

Is there a limit to the amount that can be gifted?
I guess the first step would be to contact a mortgage advisor to see if she can get a mortgage, and if so, for how much.

MaryNB

Anntay550 said:

Is there a limit to the amount that can be gifted?
I guess the first step would be to contact a mortgage advisor to see if she can get a mortgage, and if so, for how much.

A broker is a good idea. The general lending cap is 4.5x salary but will depend on her credit history and other outgoings. A multiplier of 4.75x or 5x is generally only possible with a large deposit and/or high salary. Some lenders require a deposit of minimum 5% but a deposit of 10% will give her more options. 

I'm not aware of any limits to gifted deposits. Nationwide had a limit for FTBs for a while last year but has since removed it. In the case of a gifted deposit, anybody gifting the money will have to sign a letter saying it does not have to be paid back and the person gifting it won't retain any interest in the property. A solicitor will check the source of the funds so it's important to have paperwork to back it up.

dimbo61

If your going to rent to your daughter you need to follow certain legal obligations.
EPC which should be " E" or better. Cost £50/70
Gas Safe Certificate and boiler service if the house has a gas supply ? Gas boiler, gas fire, gas cooker ? £50/70 for GSC and £150/200 for service
EICR ? £200 to make sure electrics are safe !
Landlord insurance 
Smoke alarms, CO alarm AICO Ei208 £26 each. and Heat alarm device in kitchen.

BikingBud

Is there a difference in treating it as a family funded loan/mortgage?

If all parties are willing can this be achieved more efficiently?

You decide the interest rate, the terms and conditions and also ensure you are happy with the level of risk. 

AdrianC

If the intention is for the daughter to eventually buy the property, and there is no urgent pressing need for cash, then surely the best solution is for the property to be transferred straight to her name from the estate, with an agreement to repay the value of the bequest to the beneficiaries of the will over time - in effect, a private mortgage.

Then, when she's in a position to borrow, she can remortgage commercially and repay the family debt...?

No SDLT, no CGT, no income tax, no legalities of landlord life...

zagubov

Might be remembering this wrong but didn't there used to be offset mortgages where family members savings were in an account linked to the mortgage?