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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 8th Jul 08, 7:02 PM
    • 868Posts
    • 1,782Thanks
    Former MSE Wendy
    MONEY MORAL DILEMMA: Should you still help your kids get on the housing ladder?
    • #1
    • 8th Jul 08, 7:02 PM
    MONEY MORAL DILEMMA: Should you still help your kids get on the housing ladder? 8th Jul 08 at 7:02 PM
    Here's this week's hypothetical situation for you to cogitate on:

    Should you still help your kids get on the housing ladder?

    Your daughter and her husband have spotted their dream house, but they’ve no deposit and there are no 100% mortgages anymore. You’d always promised to give her the money and be a guarantor, but you think the markets crashing and this is a nightmare time to buy. Do you stick with your promise and leave it to their judgement or take control even though she’s an adult, after all its your money?

    Click reply to have your say.

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    Last edited by MSE Deborah; 08-07-2008 at 8:27 PM.
Page 1
    • *Louise*
    • By *Louise* 9th Jul 08, 12:22 AM
    • 9,046 Posts
    • 28,113 Thanks
    *Louise*
    • #2
    • 9th Jul 08, 12:22 AM
    • #2
    • 9th Jul 08, 12:22 AM
    I don't think it's a matter of taking control, more like giving facts about the state of the market at the moment, and giving advice. If I had the money there, I would give her it - but she would need to convince me why it had to be THIS house RIGHT NOW iyswim. Otherwise my advice would be for her to wait.


    I'm hoping my daughter will grow up to be sensible enough to realise her mother is always right, hehe.
    Cross Stitch Cafe member No. 3
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  • jamescoleuk
    • #3
    • 9th Jul 08, 2:32 AM
    • #3
    • 9th Jul 08, 2:32 AM
    This is not like lending someone a sweat-shirt and not getting it back. It's money, it's serious and I would never fund something I knew to be a financially unwise decision. If it were their money I would do everything in my power to prevent them making a foolish decision.

    And anyway, how much can their dreams be worth to them if they haven't bothered to save for a deposit? Not that much, they can wait.

    I would maybe compromise by taking the money I promised them and investing it, or putting it in a savings account, so they could see it was waiting in the wings for the next swing upwards.
  • dudleyboy
    • #4
    • 9th Jul 08, 7:01 AM
    • #4
    • 9th Jul 08, 7:01 AM
    If you don't mind seeing thousands of your hard earned pounds being eroded away within a matter of months then sure, why not...?(!)
    • Dorrie
    • By Dorrie 9th Jul 08, 7:17 AM
    • 66 Posts
    • 46 Thanks
    Dorrie
    • #5
    • 9th Jul 08, 7:17 AM
    • #5
    • 9th Jul 08, 7:17 AM
    No deposit saved up? Why not? No way would I give my daughter my hard earned cash when they can't even be bothered to do their bit.
  • Sharp_Eyes
    • #6
    • 9th Jul 08, 7:29 AM
    • #6
    • 9th Jul 08, 7:29 AM
    [quote=jamescoleuk;12346017]
    And anyway, how much can their dreams be worth to them if they haven't bothered to save for a deposit? Not that much, they can wait.
    quote]

    I agree. I was just going to post that if they had showed some financial plans that they are ready to have this house then I would advise on the market, and tell them to wait until we have a clearer picture of the future. No sense them starting off with their heads under water! Eventually we could try to come up with a plan and maybe match what they had raised for the deposit if it was substantial enough. Houses don't just need initial buying. There are scads of fees involved, there are repairs to consider as well as furnishings and decorations. If they are depending on parents for all of that, hard luck!
  • stogiebear
    • #7
    • 9th Jul 08, 8:03 AM
    • #7
    • 9th Jul 08, 8:03 AM
    The answer is very simple... (I know because it has worked twice for me.)

    MATCH their deposit... not a penny more - not a penny less.

    Tell them from the very start of their house buying quest that this is what you are going to do and make sure that if the house is sold in the future that you get that 'gift'
    back. And do it properly through an attorney.

    If it's their dream house then it's basically an interest free loan for life which they never have to pay back unless they sell. If the marriage falls to bits then you won't have wasted your own money.
  • LittleEarner
    • #8
    • 9th Jul 08, 8:33 AM
    • #8
    • 9th Jul 08, 8:33 AM
    MATCH their deposit... not a penny more - not a penny less.

    Tell them from the very start of their house buying quest that this is what you are going to do and make sure that if the house is sold in the future that you get that 'gift'
    back. And do it properly through an attorney.

    If it's their dream house then it's basically an interest free loan for life which they never have to pay back unless they sell. If the marriage falls to bits then you won't have wasted your own money.
    Originally posted by stogiebear
    Completely agree. If you truly have a dream, you will want to work for it. Sacrifices need to be made, etc. I would be more inclined to help them cut back and save enough for a deposit first. Once they have achieve that, then offer something to top it up later on.
    • Ebenezer_Screwj
    • By Ebenezer_Screwj 9th Jul 08, 8:45 AM
    • 420 Posts
    • 229 Thanks
    Ebenezer_Screwj
    • #9
    • 9th Jul 08, 8:45 AM
    Housing Handout
    • #9
    • 9th Jul 08, 8:45 AM
    The savings ethos has been cast to the winds as being "old fashioned" no doubt. The chickens have come home to roost on this one - no sense of responsibility, no savings, no deposit, no house. Tough.
  • Glyn
    Whilst I do sympathise with youngsters in the present climate... I , probably like the previous mailers ..have learned from 'being around a bit' and know from previous slumps that if you buy at the 'wrong time' you stand to loose big time.. even loosing the house its self if you cannot keep up payments on the mortgage. If they can rent for a while longer.... then maybe save in that time... they will be showing a maturity..and I would be happy ( if able to myself) help with a 'matching of deposit'. I would also help maybe with things like moving fees and furnishing when the time came. But at the mo... I think its unwise to throw money at it...not till we have an idea of how long this little slump will last.
    I also think it is a lesson to learn (that a previous generation knew from the start).... that if you cant afford something easily ...you cant afford it ....full stop!
    Last edited by Glyn; 09-07-2008 at 8:58 AM. Reason: spelling error
    • A.Jones
    • By A.Jones 9th Jul 08, 9:01 AM
    • 506 Posts
    • 441 Thanks
    A.Jones
    For me it would depend on the circumstances. If for example, they lived in our house on a "temporary" basis for the last few years and we wanted our own space back, then I would be more inclined to say yes. If they were renting somewhere else, then no.
    • JimmyTheWig
    • By JimmyTheWig 9th Jul 08, 9:45 AM
    • 11,741 Posts
    • 11,307 Thanks
    JimmyTheWig
    You’d always promised to give her the money
    ...
    after all its your money?
    Originally posted by MSE Wendy
    You need to decide which it is.
    If you are giving her the money then give her the money. Explain the situation. Show her the facts and figures. But at the end of the day it is her money.
    If they are going to be happy in that place for 5-10 years then it's not such a bad investment.
    The house price crash might not be as bad as we think, especially in some areas.
    And if the alternative is being ripped off by dodgy landlords, big rents in advance, etc, then maybe this house isn't so bad after all.

    But if it is your money, if you are lending her the money, if you are buying a share of the property then yes I wouldn't go with this deal at this point in time - no more than I would be happy to give a 100% mortgage if I was a mortgage company.
  • siber
    Now this rings a bell... This is EXACTLY the situation I find myself in right now (except I'm male).

    I'm 25 and just started my first job after (postgraduate) university, and was looking to buy a flat nearby in Salford/Manchester. After speaking to banks regarding mortgages, I realised that I need a substantial deposit. I've modest savings and the remains of an unspent student loan, so approached the parents for some cash to boost my deposit.

    With the way the housing market is at the moment, I was able to contact the seller and shave £17,500 off the value of £115k (a full 15% discount!). Therefore, the (BoE +0.5% tracker) mortgage repayment is now over £50 per month cheaper than rental of an identical flat in the same estate - thanks to my parents' contribution. I fully intend to repay my parents loan - which was made following the agreement of a promissory note.

    Given the level of discount desperate sellers are offering in these 'times of woe' (?!?), assuming the property is for habitation rather than investment, and the purchase is made with moderate to long term viability, now is the ideal time to buy. It should cost any more than rent would, especially given that rents are rising as fewer people buy houses. Sure, the market's fragile, but it won't be too long before rents rise up, banks regain confidence and lend more, and values rise again. All the while the population keep getting pay-rises, inflation is positive and over the long term prices and values will rise.

    Thus, assuming the daughter and husband are financially secure (and therefore likely to be able to afford and continue paying the mortgage) and they are able to negotiate a substantial discount, now is an ideal time to help them buy! Sure, the value of the house is going to fall, but in time (5 yrs?) it should recover to at least the level paid. However, obviously the parents should at least expect to get most of their money back before committing to the deal - if daughter and hubby are bad with cash, walk away! And if the situation still seems unclear, a simple promissory note makes the money into a formal loan, even if no interest is payable.

    Note also that I understand that any 'gift' (or combination of gifts in a tax-year) above £7,000 between parent and child is technically taxable! Beware!
    Last edited by siber; 09-07-2008 at 3:12 PM.
    New Year's Resolution:
    Make sandwiches the night before. DON'T BUY LUNCH AT WORK!
    • ringo_24601
    • By ringo_24601 9th Jul 08, 10:24 AM
    • 17,148 Posts
    • 27,896 Thanks
    ringo_24601
    Completely agree. If you truly have a dream, you will want to work for it. Sacrifices need to be made, etc. I would be more inclined to help them cut back and save enough for a deposit first. Once they have achieve that, then offer something to top it up later on.
    Originally posted by LittleEarner
    My parents did this for me.. I saved and saved and got about £12k together over 3 years after starting my first job. They matched this (as did my grandparents) and gave it to my girlfriend and I (now married) on the proviso that it was an interest-free loan until the day of our wedding - at that point it would turn into a gift.

    Without it, i'd have only been able to buy a flat, rather than a house, and i wouldn't have been able to redecorate or furnish it to a nice standard. Cheers mum, dad and grandparents!! As my granny says; she can't take it with her and she'd rather see us enjoy ourselves and prosper than let the tax man take 40% of it when they leave us.
  • amyjdavidson
    No deposit saved up? Why not? No way would I give my daughter my hard earned cash when they can't even be bothered to do their bit.
    Originally posted by Dorrie
    That's seriously unfair. Circumstances sometimes dictate that saving for a deposit is not acheiveable. My partner and I were forced out of the rental market last year (our rent went from £550 a month 05/06 to £600 a month 06/07 to £750 a month 07/08), therefore we HAD to buy as we were throwing serious amounts of money away and could pay less in monthly payments with a mortgage. Unfortunately this was July 2007, in Aberdeen of all places (our house prices still aren't falling) and we had no deposit saved up because up until that point we weren't ready to start saving. Debts to clear from uni (the main part), overdrafts to clear, car to run, bills to pay and a decent enough wage but not enough left each month to put into anything.

    I have a terrible credit rating due to credit and store cards I'd taken out at uni (foolish I know) but luckily my partner's credit was ok so we got a 100% mortgage ok. However, there was a chance that wouldn't have worked out like that. My family hadn't the money, yet if my mum had promised me money for my first house and to become guarantor then I can only assume she had saved money for this and it really isn't her decision to make which house I would buy and at which time. I mean, the guarantor part wouldn't be an issue - I wouldn't buy a house that would put my family at risk, but the money she would lend me would be paid back to her so she would lose nothing.

    I think it's only fair for the family to do as they said they would do and trust that their child could make a good decision. Of course they would have to discuss it, but you can't make a promise like that, and then add conditions because the time isn't right for you. The time may never be right.
    • Cameron
    • By Cameron 9th Jul 08, 11:17 AM
    • 67 Posts
    • 33 Thanks
    Cameron
    What smart kids!
    If these where my kids I'd be proud, they hadnt rushed in to buy a house when everyone else had!

    Now is the time to buy a house!

    But before you rush out take a look at this http://www.taylormob.co.uk/house_prices_v_wages_v_time.html
    Makes grim reading

    Rising food, rising inflation, rising oil and a debt mountain described in willieans... or is it pillians.

    What the parents should do is, think where house prices are going to fall to and then get them to offer that for the house - its a buyers market.

    My guess (and I now nothing) is average house prices will fall by 34% (24% drop and 10% rise in inflation) but whats worse is the bottom end of the market like terraced houses will fall by 60% (50% drop with 10% rise in inflation) I can see a 10% drop allready this is probably thanks to all the buy to letters who rushed in! - see http://www.houseprices.co.uk/ and check your street sale prices if you dare.

    Sadly its always the people who need the most who loose the most.

    I'm sorry if this appears very unfair but thats life.

    On the positive if you've allready got an over priced house and a mountain of debt then dont worry, with this rising inflation it wont be long before you owe nothing!

    Anyway what does it matter how much your house is worth! you arent going to profit from it! It only matters to your kids when you die, o'yes and the tax man!

    Cameron
    Advice is cheap! Hence there is a lot of it about!
    Try not to be a victim!
  • philbarber
    Hold on a moment
    Don't stampede into gloom with the herd. The media is fueling the doom and gloom but there nothing safer than houses. The minor hold on house prices is nothing in comparison to the early 90's and we now look back and realize that the 90's drop was a temporary dip. The people who lost in the 90's were those who sold or had to sell. The winners were those who bought. This year may well bring zero growth and maybe even a small drop but not enough houses are being built and we don't have 14% interest so prices will rise as sure as eggs are eggs.

    Doom and gloom plays into the hands of the buyer so buy, buy , buy and put in low offers. You'll be amazed at what you can get. I'm a property investor and I'm buying all I can. It's a wonderful time to buy so long as you can cope with the cash flow. My view is that parents should help children now more than ever and don't hang around. We only have until spring next year before the buyers market evaporates.

    Phil.
  • schoolfundraiser
    Don't be mean give them a leg up
    Yes if I had it I would give them the money as a loan. If my first husband's parents hadn't lent us the money for the deposit 31 years ago we would never have been able to afford our very first house. And it was hard to pay them back but without that interest free loan (and his dad acting as guarantor on the mortgage) we would never have managed to save enough for a deposit. (This was in the period of the early 70s when devaluation of the pound, and general economic problems meant that prices doubled at a stroke including house prices - a year before our house would have cost £5K instead of £10K. (My salary at this time was £22 a week)

    Most of us with money now only have it because our mortgages are a very small percentage of the house equity thanks to rising house prices. Where we moan about a £40 to 50K mortgage our children are facing at least a £100K mortgage plus need a hefty deposit. So the answer to whether you loan them the money is YES YES OF COURSE YES

    When you loan them the money depends on the circumstances of the individual house they want. You should be savvy enough by this time to weigh up whether it is overpriced or not.

    But bear in mind that all this doom and gloom about a fall in house prices needs to be put in context. A 1% fall on a £200K house is £2K. Big deal. I have not seen anyone say that house prices are falling by 10% a month - and 1% a month needs to go on for nearly a year to actually make that much of a difference given that buyers are likely to accept offers a fair bit under the selling price.

    And they are intending to live in it aren't they? Even if they split up they are legally married and can't be divorced in much less than six months to a year and the house could be rented out for a while until things pick up again.
    • happyinflorida
    • By happyinflorida 9th Jul 08, 4:13 PM
    • 727 Posts
    • 610 Thanks
    happyinflorida
    I would never recommend buying a house
    In England, owning your own property is the worse situation to be in.

    If you become out of work, due to illness or unemployment, happens to many, without the very expensive mortgage insurance cover, not many can afford that, you don't get the Dept of Works and Pensions to cover that until you've been out of work for 39 weeks and then they will only pay towards the 1st £100K of your mortgage and only the interest only part, nothing towards the repayment part of any mortgage.

    If - when you're old, you have to go into a care home, the value of your property is taken into account. So you will be expected to sell it to pay for your care home fees. They start at around £400 per week and can start at £700 per week for a nursing home. So be aware of this everyone and don't buy!!

    How the hell are kids today expected to save money with the cost of renting?

    It's a no-win situation.

    Certainly don't buy. If you get into debt it's the worse case scenario to own a property. Creditors can try to make you bankrupt - you'd lose everything!

    The equity in a property is not worth having in debt - it'll be taken into account if you wanted to do an IVA.

    Don't ever buy!
    • robpw2
    • By robpw2 9th Jul 08, 4:15 PM
    • 12,647 Posts
    • 26,389 Thanks
    robpw2
    IT WOULDNT BE FAIR To ask my parents for that kind of money there is for of us


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