Help children to buy in London - is this too ambitious?

LL_USS

@EssexHebridean thank you for editing for me, very kind of you. With your help I also feel a bit more confident to go on asking more questions.

Thank you @silvercar and @JC268 for sharing your experience and idea.

It is such a complexed arrangement for what we want, but a good problem to have as we have options.

The idea has changed much over the last couple of years. I once thought about remortgaging our main house (unencumbered, interest only mortgage) and sell stuff and put all in to help buy the first property in my older kid's name first, then sell later when it's time to help buy the second one for the young one. Yet that plan would stretch me out too much whilst: (1) it is the right time to sell the main house soon when it's still in a good condition, and (2) it is the right time to work on my old property to move back in. I've been letting my colleagues and extended family use it but it needs work soon, two more years of use without refurbishment is already a stretch.

So the current plan still is in two years, start to put the main house in the market and start working on the old house for me to downsize to.

LL_USS

@JC268 indeed I would like to do this due to potential hefty IHT too. I did not register to inherit any allowance (and not much allowance to inherit when I could register anway as the majority of asset was built up after), so we only have that standard 325K allowance plus 175K residence nil-rate band. As I said elsewhere on the forum, I don't mind paying taxes when taxes are due. It's just the kids have been through hard work and hard times with me to build up what we have. They would not have enough liquidity asset to pay for the IHT anyway and would have to sell things cheap and quick. I'd therefore better sort things out for us as soon as we can.

LL_USS

Now the problem of how to deal with a set of big deposits for the kids: how much of each deposit is gifted, how much as a loan, in the way it fits the purpose (inclduing to satisfy the banks to get the mortgages).

@JC268 I am okay to wait till the second child turns 18 so no need for Trust fund.

Say I sell the house and some other investment to have a pot to use. 1/2 of the pot value for each kid to use.

Help Kid 1 to buy, no need for mortgage at first, perhaps the value to buy is 3/4 of the pot (more than their share). This means Kid 1 will need legal paperwork to say the part over their share of the pot (1/4 pot value) is what they will need to give back to Kid 2 (by remortgaging an encumbered property) later. Both kids want to stay together for a few years in this first property, and share the bills.

The remaining 1/4 of the pot after the first purchase can be given to Kid 2 to invest or keep in saving accounts (risking reducing the actual purchase power a bit as the housing prices may probably be higher than the saving interests) till they are ready to buy. That's when they put this 1/4 of the pot value, AND the money Kid 1 remortgaging property 1 (another 1/4 pot value), AND they can add a mortgage of their own to buy property 2.

As @silvercar's case I may need to go on one mortgage form (as a guarantor??) if they cannot afford yet.

It does my head in and I sometimes want to give up planning and just see how things go. Even if this is roughly what we can do, then still we have the issue of gifting vs. loan from parent for the paperwork.

Method 1 - Loan then gradually wiping it off: elsewhere in the forum there's an idea that, say if they save 10K/ year, they send it to the parent and a few times of this saving amount is shaved off the loan - but this is a problem for the banks to approve the mortgages based on such big family loans, as @EssexHebridean says. And potential IHT.

Method 2 - Gifting it all method rather than loans to be wiped off gradually: easiest way for mortgages and IHT purpose, I suppose, but with a problem of gifting too much too early - my children may not work as hard as they should.

If we have no choice but only to treat all as gifts to satisfy the banks, then is there a way for gifting away but still make the kids responsible? For e.g. "I'll give you this, but on a condition that you have a proper full-time job" or something? AND somehow some paperwork to say the gift is only for the children, not to be shared with people living with them - I don't know if there's such a thing.

Albermarle

I am thinking of selling my house and move back to our former home, which was smaller and would fit perfectly as the kids leave home. THey don't seem to want to stay in the same city and would love to find their jobs/ start their young years somewhere else

On a practical note, if they move to another part of the UK, it could make sense to rent for a while to make sure they are going to settle there, before buying somewhere.

I speak from some personal experience.
DD came home after Uni and got a job locally.
Due to not wanting to live at home and high local house prices ( SE England), she changed jobs and went to live in a large Northern City where her best mates from Uni lived ( plus a more exciting location).
After a couple of years the novelty began to wear off, and within 3.5 years she was back home. Luckily she had stayed in rental accommodation whilst there.
A lot depends on their personality, whether they meet up with a new partner, relationship with parent(s) etc . 
Once I left home, I never had any desire to move back, but everybody's different.

LL_USS

Hi @Albermarle, lovely to see you here!

What you say is very true. 

First, yes, I'll do that then - allowing a longer lag, enough for the younger kid to stay in university accommodation a while to know people outside of the family, and for the older kid to rent in the city for a bit to get to know the area. It'll be hard for me to delay further, but we cannot rush this, I suppose.

Second, very much agree, we don't know what the future holds. But for choosing where to study, my older kid already insisted not going to the open day at the university where I work, and in our current city (they said they wanted to take student loans and start their independent living). Younger one already telling me the same. Their dad had lived in another city when young and he somehow passed that dream to them (my children tell me their preferences, yet I know if for some reason we lost all our money and down to 0 again, they would be fine to live within our means and build things back again with me). The "dream" city happens to have more chances for employment too, more certainly compared to our current city. Where I live now is great for only certain types of jobs, and for retirement. The chance of them coming back home after university is small, plus I don't want to have the burden of keeping it whilst it's too big to pass on to one of them - it needs spliting into two portions before I pass on to each of them. The property I downsize back to is where they lived when they were little and there's enough space (just!) if they come back temporarily.

Renting in the city we want (longer than the trial period) would be crippling. I suppose putting money in a place that we actually live in (here perhaps both of the kids will stay together for a while) is what makes the most sense financially.

Albermarle

 I've always thought if living too far out, it doesn't feel like London any more and all of the travelling could become unbearable

Of course if you go too far out towards the M25, it does not feel like London anymore. However the travelling into London is probably less of an issue than you think. London and the surrounding areas have a very comprehensive public transport system.
Travel  times by train to Central London can be as little as 30 minutes. One hour at most. Many lines have new trains.
Only gets really busy nowadays in Tues/Wed/Thurs rush hours.

LL_USS

@Albermarle I'll need to adjust my perception I suppose. In our current city we've been spoilt living so central, being able to walk down to all the cafe, shops, theaters, cinemas and my work, kids schools (yet on the edge of the countryside if we walk in the opposite direction) but people need to adjust to live in London. I still have a headache travelling on the tube in London so I am dreaming of the kids being able to cycle to work. 

Are you familiar with the North part of London, or the South? I am looking at the North only because I feel I know it a bit better having been scouting there for years (I looked at buying a few years ago but then I decided to wait till we are at a position to actually use the place rather than hedging the opportunity, renting out before using). For my budget if we want a two bedroom house I looked into Stratford, High Gate, Woodgreen but have been told these places have passed the "up and coming" status and are now more expensive - and I should look into Canning Town for example. If buying a flat more centre then the search is manageable as there are not too any options. If buying a house further out I will need to decide an area first as there are too many options and I don't know where to start from.

Albermarle

LL_USS said:

@Albermarle I'll need to adjust my perception I suppose. In our current city we've been spoilt living so central, being able to walk down to all the cafe, shops, theaters, cinemas and my work, kids schools (yet on the edge of the countryside if we walk in the opposite direction) but people need to adjust to live in London. I still have a headache travelling on the tube in London so I am dreaming of the kids being able to cycle to work. 

Are you familiar with the North part of London, or the South? I am looking at the North only because I feel I know it a bit better having been scouting there for years (I looked at buying a few years ago but then I decided to wait till we are at a position to actually use the place rather than hedging the opportunity, renting out before using). For 600K budget if we want a two bedroom house I looked into Stratford, High Gate, Woodgreen but have been told these places have passed the "up and coming" status and are now more expensive - and I should look into Canning Town for example. If buying a flat more centre then the search is manageable as there are not too any options. If buying a house further out I will need to decide an area first as there are too many options and I don't know where to start from.

I do not live in London, but out near the M25. I have lived in London a long time ago, and still go there occasionally and family members work there, but I would not feel qualified to really make a housing area recommendation.
I was just pointing out that travelling in from the suburbs etc on overground trains is not always that bad, especially if you can work from home for a coupe of days.
OK if I was on the Tube 5 days a week, that would be less pleasant for sure. 

silvercar

LL_USS said:

@Albermarle I'll need to adjust my perception I suppose. In our current city we've been spoilt living so central, being able to walk down to all the cafe, shops, theaters, cinemas and my work, kids schools (yet on the edge of the countryside if we walk in the opposite direction) but people need to adjust to live in London. I still have a headache travelling on the tube in London so I am dreaming of the kids being able to cycle to work. 

Are you familiar with the North part of London, or the South? I am looking at the North only because I feel I know it a bit better having been scouting there for years (I looked at buying a few years ago but then I decided to wait till we are at a position to actually use the place rather than hedging the opportunity, renting out before using). For 600K budget if we want a two bedroom house I looked into Stratford, High Gate, Woodgreen but have been told these places have passed the "up and coming" status and are now more expensive - and I should look into Canning Town for example. If buying a flat more centre then the search is manageable as there are not too any options. If buying a house further out I will need to decide an area first as there are too many options and I don't know where to start from.

DS1 bought in St Albans. His journey into London is about half an hour on a fast train. It's a lovely area with lots of green space and has the advantage of London being on his doorstep for work and if he wants to go there. I live someway between the 2 and journey time to London is about the same but don't go into central London that often. 

LL_USS

@silvercar oh yes St Albans seems good. We went to see friends in London last weekend, driving to St Albans then paid 3-4£ for parking in the car park next to the station, and spent under £17 for two adults one child (with family railcard) to take the train to St Pancras. It was only half an hour and it was fast. I'll have a look around that area too thank you, if we still end up buying a house. I hope £600K can get something not too bad.