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DS has got lump sum - how can we help him make the most of it

(31 Posts)
housebuyingquestion Sun 13-Mar-16 10:39:28

I've NC for this as some info is identifying.

DH and I own a house overseas which due to various factors isn't likely to sell anytime quickly.

We have combined income of around £60K and no mortgage to pay on the overseas property.

However unless we sell it we are not in a position to buy here in the UK (no deposit) so are paying rent (have been for two years) - we are saving for a deposit but DS is at uni and we are also paying off credit cards to ensure we have a good credit rating - so most money is committed to that.

Anyway DS has been gifted £45k by his DGF which is currently sitting in his savings account. DS is 19 years old.

We would NEVER consider asking DS for money as a deposit - that's not my WWYD - my question is should we use our expendable income to help DS buy a house (eg: be on mortgage together?

TBH one of our main reasons for wanting to buy in UK is so that DS (only child) has some inheritance from us - he would already have house abroad if that doesn't sell and likely property from DGF. If we bought in UK (once we had deposit) he would inherit that property.

For info I am getting close to age (48 now) where getting a mortgage may be tricky - DH is unlikely to get one at all as he is in his sixties. So imagine it will be a financial plan with DS and I.

DS is very good with money and has already indicated he thinks property would be best investment.

So does anyone have any suggestions as to the best way he can invest his money and how we can help?

Our lack of deposit situation is a separate issue- but highlighting this to show that DH and I don't have mortgage/property here so may be harder to act as guarantor or get Buy to Let property for DS.

Thanks

holeinmyheart Sun 13-Mar-16 17:28:35

Absolutely, you should buy a house, with his money as the deposit, and live in it. It will belong to your son but as you have income , you will act as his guarantor. I did it for all my DCs when they were at UNi.
You can pay the mortgage and you would be perfect tenants in return for a slightly lower rent and paying the insurance etc.
Then when you have saved enough he can reclaim it. Meanwhile it will have been looked after properly ( tenants can be a nightmare) and your house abroad might have sold.
Let's hope he loves you.

holeinmyheart Sun 13-Mar-16 17:29:42

If you have income you can get a mortgage up to 75 in the Uk.

housebuyingquestion Mon 14-Mar-16 18:00:21

Thanks holeinmyheart

holeinmyheart Tue 15-Mar-16 08:53:24

As your DS is your only child I am sure that he won't mind handing the money over to you so that you can buy a house. He knows that it is going to come back to him.
You can put his name on the deeds anyway.. There are no deeds as such now in the UK as the house will be registered with the Land Registry. You will have to pay for the privilege 😒
Just make sure that if he marries everything is in his name, as some people get very nasty when money is involved.
Also when you are buying, shop around for solicitors as they don't all charge the same. There can be a difference of hundreds of pounds.

chelle792 Tue 15-Mar-16 09:00:15

My DH was gifted money and bought a house at 22, best thing he ever did. In fact, we both bought young and now at 29 are feeling the benefits

senua Tue 15-Mar-16 09:09:47

If you sell your own home any profit made is outside the scope of Capital Gains Tax. If he buys the property but you live in it then it may be seen as an investment property so he will be liable to CGT. Unless the 'we' living in the house is the family unit.

But what are his plans? At 19 does he want to be tied down to living in your location? What will you do when he wants to buy himself a house halfway across the country, because that's where his graduate job is.

Property is a medium/long-term investment. You need to think what you-two and he-independently will be doing in the next five-to-ten years.

EssentialHummus Tue 15-Mar-16 09:22:38

I think you need to ask him what his plans are, in an open-ended way. What if he buys now in location x, but after uni wants to move to Y? He wouldn't be able to sell the house because you'd be living in it, and would need to start from scratch on saving? Would you all live there? What about when he starts a family? Would you be paying the mortgage? Who chooses the house location and style? Who pays for decor?

I'm sorry to say, but to me it does sound like you want a more secure property for yourself and your DH to live in, possibly at the expense of your son. You either need to structure this in a way that works for him, or let him take the lead on how he spends his money (with no pressure from you).

holeinmyheart Tue 15-Mar-16 11:29:04

The OP knows that it is a temporary measure until they can save enough for a deposit themselves.
The house can be in anyones name. If he comes back to live for a few months then he will not be liable for capital gains as it will be classed as his main residence.
People are over thinking this.
If there were other siblings then I would be giving different advice. It does cost to buy and sell houses and also stamp duty has to be taken into consideration. You can also lose money.
And I wouldn't buy a new build. I would extensively research to see that it was not near a water course/ flooding area. Also the OP son needs to be able to keep up the mortgage repayments alone.
It will be years before their son would want them to vacate the house. He is only young and he will probably move around/ go travelling. I think having trouble free tenants living in his investment is a very good idea.

However as an alternative he could split the money between Ratesetters, cash Isas , Zopa and shares. My money is invested across the board. It would undoubtably be more accessible but it wouldn't answer the Parents need to live in a house that was would also be helpful to their son.

housebuyingquestion Wed 16-Mar-16 07:08:45

Thanks all - apologies for the delay in responding.

I know it sounds as though we want to take "advantage" but seriously this is not the case - I only mentioned our current situation to illustrate why we couldn't use an existing property or mortgage in UK to help DS through re-mortgaging for example.

You're right that DS's plans can and will change - he is not living in the same city as us at the moment but would like to come back here after graduating. He has said that he sees our home city as his base and would like to buy property here - either for himself to live in or as an investment/buy to let. Having a property here would not tie him down as we would be paying the mortgage. He could travel, go abroad to work/live or move cities in the UK.

If it happened that we were to live in that property then we would pay mortgage for him (in lieu of rent) and save money as well to buy another property once DH and I had a deposit saved. We'd pay ills, insurance, renovation costs as well of course.

Of course DS may want to by in an area where we wouldn't want to live or go for something more "young" - there are a lot of apartments in our city centre.

The issue of décor/style of property is important - and DS would have full say - we would see it as a temporary base for DH and I (mortgage will be cheaper than rent if we moved in) and we would then buy somewhere smaller for ourselves once we had the deposit to buy.

I presume if my name is on DS's mortgage we would still be able to get a second home? Not too sure how that works to be honest.

I'm just mulling ideas around at the moment and am not planning to whisk his lump sum away. I know that he is very lucky to have generous DGF but he (and us) are concerned on the best way to invest and come from background where property is seen as sensible option (would not know where to start on investments/shares etc.)

I wondered whether, rather than make a decision now, he should but it in a Help to Buy ISA for First Time Buyers - which would mean he would have to apply for mortgage solely in his name a few years down the line as we would not be eligible to take advantage of this scheme.

DropYourSword Wed 16-Mar-16 07:15:05

Oh goodness, I see other posters think this is a good idea, but I can give you another perspective.

Please please please PLEASE don't do it!! My now DH got involved with owning a house with his mum (he was pressured into buying his dad out when his parents split up). It all went tragically wrong, caused irreparable damage to the family, awful debts, insane stress. This all happened before I even met DH but I've had to deal with the aftermath. It's been spectacularly awful and I would never ever ever recommend parents and children co-owning!

housebuyingquestion Wed 16-Mar-16 08:51:50

Thanks DropYourSword - that sounds like an awful situation for your DH and is something to take into consideration. I guess no one knows how the next year, never mind the next ten or twenty will pan out.

EssentialHummus Wed 16-Mar-16 09:13:12

A few things OP (I'm not a mortgage broker, but from my own experience in BTL):

- it's now very difficult (maybe impossible?) for a first-time buyer like your son to get a BTL mortgage if he doesn't have a resi mortgage first. Will this one be a residential mortgage? How, if he's not living in it?

- you said in your OP that you're worried about getting a mortgage yourself because of your/DP's ages, but in your later post you say that moving in to your son's property will allow you to save for a deposit on your own place - how do these two ideas square? Have you spoken to a broker? Will you be able to get a mortgage as a (say) 55 y.o.? (I keep seeing "age-unlimited" products advertised, but don't know anyone who has one.)

guerre Wed 16-Mar-16 09:20:40

The other thing to be aware of is that for the second mortgage, you may well need a 25%deposit. If the property abroad sells, that might not be an issue, but if it doesn't...

peggyundercrackers Wed 16-Mar-16 12:08:27

I think it sounds like a bad idea - money and family never ever mix. I think if your DS buys a house he wants to rent out it needs to suit his needs not yours. you say you would pay the mortgage instead of rent but that means he could be loosing a lot of money each month but you are benefitting.

Mumof2twoboys Wed 16-Mar-16 12:16:30

I think you have had your life and made your own life choices. Leave your son to make his own decisions and don't pressure him into having to help you out when he's not a millionaire and that money was left to him not you

What if he wants to buy abroad himself or buy an apartment somewhere you wouldn't choose to live. Please don't force him into this as it would be hard to say no when your own parents are asking you for money

AnotherEmma Wed 16-Mar-16 12:19:36

Hmmm. DS buying a house in his name with his £45k as a deposit for you to live in and pay the mortgage sounds too complicated and full of potential pitfalls to me. If you're paying the mortgage you should be on the deeds and the house should be jointly owned. Your DS will own his share (from his £45k investment) and you will own the rest (from your mortgage repayments). And what will you do with the £60k from your overseas property when it eventually sells? In theory you could buy out DS but that would involve extra legal fees. And then he would be back to square one with £45k that he doesn't know what to do with. I think it would make most sense to keep things separate so that you own the property you live in, and he owns a property he can live in or rent out as he prefers. Is he sure that he definitely wants to move back to his home town for at least a few years after he graduates? If he does that wouldn't it make more financial sense for him to live with you?

AnotherEmma Wed 16-Mar-16 12:23:10

Sorry, I thought you had about £60k equity in the overseas property, but I reread your post and now realise that's your income not equity. How much equity do you have? How big a mortgage will you have to get?

housebuyingquestion Wed 16-Mar-16 13:03:58

Thanks all

For those implying that I am trying to live my/our life through our son - that is unfair and as far off the mark as possible. I am here asking for advice on how best to help him (at his request).

We neither have access to the money or would "short change" him in any way and any decision is his to make - after proper independent financial advice. To imply otherwise (mumof2boys) is hurtful and better fitted in AIBU or Chat.

In answer to the other questions - if we sell house abroad there is no mortgage on it - so depending on sale price we are likely to make around £200k (though this is not a given!)

I would aim to be looking at saving a 20K deposit in the next 12 months to use if the overseas property doesn't sell. This is irrespective of whether DS buys a property or not. Imagining that I can get a mortgage then we would be looking to buy at around £150k mark. Hopefully (given retirement age) that would be an 18 year mortgage.

AnotherEmma Wed 16-Mar-16 13:18:26

I think your DS should put the maximum amount (£15k I think) into a Help To Buy ISA, which he needs to do asap and before 5 April (the end of the tax year). Then on or after 6 April, the allowance will be reset so he can put another £15k or so in the ISA. He should put the rest into a savings account with the best interest rate he can find. Then sit tight until he graduates and gets a job. Then he can buy a house and get a mortgage himself.

I think you might have muddied the waters of the thread somewhat by going into your own financial circumstances, but based on your situation I think you should focus on being able to buy your own property in the UK in your own names and that should take priority over helping your son financially at this point (especially since he now has £45k to play with!)

AnotherEmma Wed 16-Mar-16 13:21:26

Also, if you eventually sell your overseas property for £200k, and only want to spent £150k on a UK property, you will have a spare £50k... So theoretically you could give some or all of that to your DS? That would add to his £45k and might even help him buy somewhere outright (depending on the location and size of the property). Being a mortgage free property owner in his 20s would be amazing!

housebuyingquestion Wed 16-Mar-16 14:12:09

Thanks AnotherEmma - yep I think I did muddy the waters! I was trying to be transparent and give all the facts but ended up confusing myself and everyone else her. Your advice sounds good and we'll pass it on to DS.

CrystalSkull Wed 16-Mar-16 21:37:22

You need legal advice. I think your plan is possible but you need to speak a lawyer who specialises in property and/or inheritance law.

sablepoot Thu 17-Mar-16 21:18:38

If you are joint named on the title of the proposed property, then as you already own a property abroad you will fall foul of the extra 3% second owners stamp duty coming into force on 1st April, which will add a lot to the house buying costs compared to if your DS were to buy alone.

housebuyingquestion Fri 18-Mar-16 06:47:17

Sablepoot - thanks so much I wasn't aware of that - just read up on it and it's a bit daunting. Will definitely push to sell house abroad before we buy and suggest to DS he goes on mortgage alone. Do you think it's avoidable if you are a guarantor (once we sell abroad and have a family home) rather than on the mortgage?

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