2nd house purchase for son to rent

iloveradio2_2 · 31 January 2006 at 9:04PM

Can anyone help with advice. My husband (higher rate tax payer) and I (minimal)want to buy a house for our son and a friend to rent from us. We've just finished our mortgage and will need about £60,000 to borrow. Know we can re-mortgage. What's the best option, I buy, we buy, buy with son as joint morgage holder (he has no collateral and is just out of Uni). Don't know whats best from a tax position. Many thanks

silvercar · 1 February 2006 at 12:36AM

Purely from a tax position you don't want a second property in your name because there will be no main residence relief when you sell. So put the house in your son's name and you act as guarantor on the mortgage. Son can then use the rent-a-room scheme to rent a room to his mate. No-one has any tax to pay, now or in the future. Wishing you many healthy years ahead but that also minimises inheritance tax.

That is all from a purely tax point of view. Don't let the tail wag the dog.

eileenfromplaistow · 1 February 2006 at 12:50AM

Funny reading this because we are in similar position, and I was thinking of posting myself! Our DD is an apprentice, and on way too little money to get a mortgage, I had thought of remortgaging for £60000, and lending her the money interest free . That way, she only has to pay the bills, and any extra from a lodger can be paid against the amount owing, She avoids having to tell a Building Society she wants a lodger. I am looking at offsetting, as we want to keep savings intact, although we would incur two sets of charges for valuation/fees etc... Any comments, please?

ps, she has to live away and find rented accommodation, which is why we want to help out!

Barney088 · 1 February 2006 at 1:42PM

I wish I had parents like you, Although if I was their age I guess mum and dads help is all you can do to get on the ladder.

As a mortgage advise I've seen this a few times recently and try to get my head around "why are you doing this" Some parents are simply investing in property to make money, in which case buy the property yourselves, others want to get their kids on the property ladder, in which case having a mortgage in their name would be a good way to go.

There are some great schemes out there that allow you to stand as gurarntor to their property and then let you walk away when the child has sufficient earnings to take on the mortgage debt on their own.

It is possible to have a mortgage at 100% of the value of the property (no deposit) although these are typically more expensive.

Worth while traking down a local broker to discuss it with and see what options you have. I've used Bristol & West / Bank of Ireland on their first start scheme recently and found them very useful. They don;t put you on the deeds unless you want, so effectivly you don't own the property for tax purposes, you do own the debt though. They suggest legal advice for this.

Hope that helps

Barter · 1 February 2006 at 2:11PM

Just one thing that always worried me when we were thinking about helping out our children by buying for them but putting it in their names: what if they took up with a partner that eventually turned out to be 'a bad lot'. If the relationship ended could that person claim half the value of the property?

I think I heard about a way of putting the property in trust so that, in your lifetime, ownership could be restricted to your child only; sorry I can't be more specific but might be worth some research?

marylee · 1 February 2006 at 3:21PM

Barter wrote:

Just one thing that always worried me when we were thinking about helping out our children by buying for them but putting it in their names: what if they took up with a partner that eventually turned out to be 'a bad lot'. If the relationship ended could that person claim half the value of the property?

I think I heard about a way of putting the property in trust so that, in your lifetime, ownership could be restricted to your child only; sorry I can't be more specific but might be worth some research?

I was just thinking about the same thing. My adult children will not be able to afford buying a house on their own and need our help. Daughter is interested, but son said, he would rather we spend my well-earnt cash on ourself. This issues really worry us about if they get married and get separated, their partners are entitled to half of the property. Believe me, we worked very hard and save to be able to help them.

iloveradio2_2 · 9 February 2006 at 8:46PM

Thank you all of you for your advice. Seems our son is going to take out the mortgage and we will supply the deposit and we'll come to an agreement when he sells. We are bidding on a flat tomorrow so fingers croseed. The Scottish system of sealed bids is not so good for the buyer. We could miss out by just a few pounds. Ho hum

luv_my_brass · 20 April 2006 at 5:33PM

I too would like to help my son & DiL to buy their own home. My house is willed to be shared equally between my two children, although one of them is already on the property ladder. I was wondering how to use the collateral on my house to give my son a large deposit, so that they could then afford the mortgage re-payments. They have a baby so the mother is only able to work a few hours a week. I am 65 and mortgage free.

jimmy_stewart · 28 May 2006 at 6:28PM

Hi, I'm in same boat with my daughter and wondered if anyone on this thread made a decision and what it was?

Thanks

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2nd house purchase for son to rent

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