Lending money to daughter to buy a house (Bank of Mum & Dad question)

theartfullodger

Lenders I have dealt with (have sons) required me to sugn a document stating it was an outright gift 

user1977

theartfullodger said:

Lenders I have dealt with (have sons) required me to sugn a document stating it was an outright gift 

Once again, the OP has already clarified there isn’t another lender involved here.

Sea_Shell

Maybe it doesn't have to be all or nothing.

Maybe gift some, outright, and then loan the rest (with repayments and a charge)

Only you know how much you can afford to give, outright, with no strings.

jennifernil

I did something similar for our daughter back in 2013, lending her money out of savings, when she needed to remortgage a property.   We are also in Scotland.

I have  a charge on the property, organised by a local solicitor, and an agreement on interest payments, all signed and witnessed in the solicitor's office.    There was a charge for the legals, about £180  back then I think.

My OH has a spreadsheet where he records all payments she makes, interest and capital repayments are worked out, and I submit a tax return when required.   As I have only a partial state pension, even with the interest she pays I do not come over the personal allowance, so no tax for me to pay.  The payments go into a separate account for ease of recording.

ProDave

Thanks for all the comments.  It has certainly been a thought provoking thread and has made me analyse some of the finer details of what is involved and what the full implications are if this did go ahead.

It is not likely to happen iminently if at all. But what it has shown is our retirement pot is "something special" and irreplacable.  It is after all our life savings from working.  As we retire there will be no opportunity to replenish the pot and it needs to be spent wisely.  Thus following that analysis I don't feel ready to tie up half our pot for such a long period of time.  When the time comes I will look again at the details and see what if anything we can do to help.  Gifting her a deposit for a normal mortgage is looking to be a more viable option.

BungalowBel

ProDave said:

Thanks for all the comments.  It has certainly been a thought provoking thread and has made me analyse some of the finer details of what is involved and what the full implications are if this did go ahead.

It is not likely to happen iminently if at all. But what it has shown is our retirement pot is "something special" and irreplacable.  It is after all our life savings from working.  As we retire there will be no opportunity to replenish the pot and it needs to be spent wisely.  Thus following that analysis I don't feel ready to tie up half our pot for such a long period of time.  When the time comes I will look again at the details and see what if anything we can do to help.  Gifting her a deposit for a normal mortgage is looking to be a more viable option.

We did this with our son - he was in a similar position to your daughter.

He found a flat and we gave (not loaned)  him  enough money for his deposit to make his mortgage affordable.  IIRC we had to sign a form from the lender saying the money was a gift and we had to prove where it had come from.

Twelve years on, he has managed to pay off a chunk of his mortgage with dribbling bonuses and  £10k from an inheritance and now only owes around £18k (the flat was only £65k to start with).   We will probably pay this off for him from the proceeds of the sale of our BTL which is going on the market next week.

jennifernil

ProDave said:

Thanks for all the comments.  It has certainly been a thought provoking thread and has made me analyse some of the finer details of what is involved and what the full implications are if this did go ahead.

It is not likely to happen iminently if at all. But what it has shown is our retirement pot is "something special" and irreplacable.  It is after all our life savings from working.  As we retire there will be no opportunity to replenish the pot and it needs to be spent wisely.  Thus following that analysis I don't feel ready to tie up half our pot for such a long period of time.  When the time comes I will look again at the details and see what if anything we can do to help.  Gifting her a deposit for a normal mortgage is looking to be a more viable option.

If she has the potential to get a good job that would allow her to move to a commercial mortgage after a while, then you would not necessarily need to tie  up the money for a long time, she could apply for a remortgage after whatever period suited.   But whatever her prospects, I would wait till she has a decent income.

The main reason I loaned our daughter the money was to give her the flexibility to sell the property (now a BTL) when it suited as she would not then have to pay an early  redemption fee.  We  had already gifted her (and our son) money to assist in paying off their original mortgages after the original fixed terms ended.  I  keep a notebook with all the gifts recorded, all were either within what is allowed annually, or are now beyond the 7 year period for IHT.   They can sort out any equalising required later themselves!

She was already working, with a good income, so I knew she would not have a problem making the payments

My OH has a final salary pension, plus State Pension, so a pretty fixed amount, which covers our retirement plans, so savings are for extra spending when required, like a new car or a new bathroom, so a different pension situation to yours.

Albermarle

ProDave said:

Thanks for all the comments.  It has certainly been a thought provoking thread and has made me analyse some of the finer details of what is involved and what the full implications are if this did go ahead.

It is not likely to happen iminently if at all. But what it has shown is our retirement pot is "something special" and irreplacable.  It is after all our life savings from working.  As we retire there will be no opportunity to replenish the pot and it needs to be spent wisely.  Thus following that analysis I don't feel ready to tie up half our pot for such a long period of time.  When the time comes I will look again at the details and see what if anything we can do to help.  Gifting her a deposit for a normal mortgage is looking to be a more viable option.

I think this is the usual/simplest route, when the Bank of Mum and Dad get involved.