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Pitfalls dd buying property with dn

25 replies

snowsjoke · 15/01/2024 07:34

Could this work? Niece is 26 and nearly two years post qualifying as a commercial lawyer. She has £40K saved up towards a deposit but lives in London. She has a boyfriend who is also just about to qualify in a higher potential earnings career but he won't be earning much at first. My dd is 18 and will be starting university soon. She also has £40K via inheritance and savings.

Could they pool together and dn get the mortgage with dd name on the deeds (she wouldn't be able to get a mortgage I presume?). Dd would continue to live at home and sub let her room ostensibly to dn boyfriend. Dn boyfriend would then buy dd out when he is able to go on the mortgage.

What are the pitfalls of this plan?

OP posts:
Agix · 15/01/2024 07:39

Dd would not be able to benefit from any first time buyer schemes or reductions when she was ready to buy her own home.

AwkwardPaws27 · 15/01/2024 07:40
  • your DD won't be a FTB when she buys in future (potentially losing out on whatever FTB support exists at that time, such as stamp duty relief)

  • the £40k may not all come back to DD - what if property values fall, or DN breaks up with BF & he no longer wants to buy?

I'd be looking at something like a Lifetime ISA instead.
Tarantella6 · 15/01/2024 07:41

The boyfriend not paying his rent.
Is dd paying any of the mortgage? If not, DN feeling like she's got no right to any increase in value and only giving her back the £40k in which case she has tied her money up for no reason.
The boyfriend not being able to afford to buy her out either because he can't raise £40k or the value keeps increasing beyond how much he can afford.
Linked to this she needs her investment back earlier than expected and the boyfriend isn't in a position to buy her out.
DD losing her first time buyer benefits re stamp duty for a house she isn't even going to live in.

Motheranddaughter · 15/01/2024 07:43

If she wants to be on the deeds she normally has to go on the mortgage

Smerk · 15/01/2024 07:44

It's unlikely she can be on the deeds if she's not on the mortgage. The mortgage provider won't want someone with a stake in the property that's not liable for the mortgage payments because what happens if they default?

IWFH · 15/01/2024 07:44

I don't see any benefit to your dd from this arrangement; but it comes with a lot of risks (outlined above).

khaa2091 · 15/01/2024 07:45

Similar set ups with siblings I know have fallen apart when one wants to settle into a forever house with partner and nobody can afford to buy the other out.

Ginmonkeyagain · 15/01/2024 07:46

I mean it sounds like a terrible idea.

Your DD loses her first time buyer perks. What 18 year old wants to be tied to a property? What happens if her cousin splits up with the boyfriend and struggles to pay the mortgage? As I understand it DD can be on the mortgage as zero income but would still be liable to pay it if payments are late/cease.

Yes, she will part own a property in London which could be useful when she graduates, but would a 21 year old graduate want to live with their nearly 30 hear old cousin and her partner (or vice versa)?

It sounds like a plan that is all about the benefits to your niece and not a lot for your daughter.

Clearinguptheclutter · 15/01/2024 07:47

Motheranddaughter · 15/01/2024 07:43

If she wants to be on the deeds she normally has to go on the mortgage

this is not true
but other concerns are valid

Ginmonkeyagain · 15/01/2024 07:49

If I was the niece I would want her on the mortgage. Why would you want to part own with someone who is not liaible for any of the mortgage payments?

Member984815 · 15/01/2024 07:53

I wouldn't do it . It has the potential to cause arguments down the line .

BodyKeepingScore · 15/01/2024 08:05

Your SD is not protected in any way in this arrangement. She'd stand to lose in the future when purchasing her own property.

Theoscargoesto · 15/01/2024 08:09

IF DD does do this (and see pitfalls above) then she needs separate representation and there should be a written agreement as to the terms she and DN agree. It should record what interest DD has in the property, and cater for what happens if the property is sold. What if it sells at a profit? What if there is a loss? If one wants to sell, will the other get a chance to buy it and on what basis/timeframe?
What if boyfriend doesn’t want to buy her out (or can’t)? Will there be a set time frame for that?

Its all possible but requires lots of thought as to the ‘what ifs’ (and that’s once the issues above have been resolved)

User5512 · 15/01/2024 08:10

recipe for disaster for everyone involved. Significant potential financial loss for your dd, what if DN breaks up with the boyfriend?

mumumumumummm · 15/01/2024 08:20

Why would your daughter choose to do this?

She can put the money into a risk free fixed rate account and get 2k a year interest tax free for the next three years.

Or she can have the complete nightmare of co-owning a property she doesn't live in. Is she on the hook for 50% of repairs and upkeep? She should be if she intends to take out any upside at the end. She'll pay capital gains tax on any upside at the end. What is she going to do if the boyfriend doesn't pay the rent? If him and dn split up? If she needs to go on benefits at any time say uni doesn't work out or she doesn't have a job at the end, she can't. She has a huge investment property. When she graduates with student debt, the rental income will be included along with any employment earnings when calculating if she has reached the threshold for loan repayment.

I'm struggling to see the upside for your DD. Why do you think she should do this as regards upside to her?

As others said, what if the flat falls in value. What if they can't sell it when they want. What if DD wants to sell and get her money back when she graduates but DN doesn't want to.

BricksTricks · 15/01/2024 08:27

This is very unfair to your DD. If you wait to help out DN, then you get on with it without dipping into DD's bank accounts. Be clear in your own mind that you may get none of the money back and need to be happy with that not damaging relationships with DN before going into it.

If finances allow then DD would be best to put the £40k into a little studio flat or 2 betonear uni to share with a friend if you guarantor the mortgage; then she can lbuild up her own equity.

snowsjoke · 15/01/2024 08:27

Thank you, I was aware of some of these issues but not others. It's something my sister suggested (Dn's mum) which I thought was an interesting idea but there are too many pitfalls for my Dd so it's a no go.

OP posts:
BricksTricks · 15/01/2024 08:28

snowsjoke · 15/01/2024 08:27

Thank you, I was aware of some of these issues but not others. It's something my sister suggested (Dn's mum) which I thought was an interesting idea but there are too many pitfalls for my Dd so it's a no go.

Easy enough to say that DD needs the money for uni, so unfortunately can't help.

Ginmonkeyagain · 15/01/2024 08:35

If DN is a newly qualified commercial lawyer, her salary is likely to increase quite a lot. She should wait it out for a couple of years and buy in her own or with her boyfriend.

Devilshands · 15/01/2024 08:59

TBH it sounds like your DN can’t afford to buy alone and your sister is thinking of her own child’s benefit here and not yours (not necessarily maliciously).

Terrible idea for your DD.

LakeTiticaca · 15/01/2024 09:25

Not a chance in hell should your DD enter into this. There are way too many things that could go wrong

SunflowerSeeds123 · 15/01/2024 09:25

Your DD has a good start , so I think she should just keep adding to her savings when she can.

The rest of it sounds dodgy to me.

MrsKwazi · 15/01/2024 09:30

Let her invest it and forget about it for a few years, let the magic of compound interest do its thing.

Singleandproud · 15/01/2024 09:32

Get your DD to open a LISA she can put the full £40k in over 10 years (max £4k a year keeping the rest in a high interest account before transferring over) and the govt will give her £10k plus interest, she'll then be 28 and ready to use the money as a FTB on her own place.

TempleOfBloom · 15/01/2024 09:37

Why on earth should your 18 yo Dd cash flow her older richer cousin’s boyfriend?

No benefits to your DD.

She’d be over a barrel accepting offers / valuations from the boyfriend at a time of her choosing to buy her out, she can’t go to open market.

If the flat falls in value she loses money. It the value plateaus she loses money in real terms due to inflation and loss of interest on her savings.

If it rises in value she could be liable for CGT as it is not her primary residence.

She would be liable for tax on the bf rent… even though all that rd t is doing is paying the mortgage so that he can live there.

Your Dd is far too young to have her assets tied up like this but still only 3 or 4 years off potentially wanting to use her money to buy a place if her own. No guarantee she could get the money back in her timescale.

I am astounded that your Dsis has the cheek to suggest a plan to use your DD’s money to facilitate the cousin’s boyfriend’s interests!

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