Giving house to step-daughter?

[IsMadl]

Hi all, I have one step-daughter, no biological children (could never have any). My step-daughter is 27, she got married last summer, and is expecting her first baby. Her dad and I got together when she was 10 (her mum passed away when she was 7), we married when she was 16 and have been together happily since.

Before her dad and I married I had a 3 bed semi, we live in the North but it recently got valued at £300,000. We have been renting it out since I moved in here 12 years ago. The money has funded mostly my pension and odds and ends here. I'm a primary teacher though so have a good pension as it is.

SD and her husband have been saving really hard for a house, they earn well, she in the civil service and he in finance, but they work in London and obviously it is expensive. She had about £150,000 from her mum (-uni costs, wedding costs etc.) and they are saving.
Currently the house I had is to be split between my niece and nephew when I die, the house I live in now will go to step-daughter when both dad and I pass.

To me my step-daughter is my own, I was never able to have children of my own and I think she is incredible, so smart, beautiful, funny and caring. I hate seeing her struggle to build the deposit for a nice house, in a nice area with a garden which is all she really wants. I've been thinking maybe it is time I sell the house and give her the profit, obviously it would up there deposit massively. I wouldn't do it if I didn't think she and her DH had earned it but they are lovely, kind, hardworking people.

I told my husband and he said that it would be a lovely thing to do but no pressure as it is mine. My mum and dad think it would be a horrendous idea.

AIBU to consider this?

How very sad that that little girl lost her mum when she was seven, but how lucky is she that her dad found you!

Do what you feel is right, but as PP have said I would take legal advice first so that your gift is ringfenced in case of divorce further down the line.

I agree with this.

They won't get a mortgage to cover the difference though? They don't earn enough. They'd have to save for an awful long time to get that sort of house. You're better off keeping your house in situ until they're really ready.

The numbers aren’t stacking up for me. If they get £300k from you and have (guessing) £200k separately, the mortgage would be a challenge if they have to borrow £600k. They would be looking at repayments of £3000+ per month.

In addition they will have to allow for £50K of SDLT.

@Jobsworths

Apparently they can get around 800k mortgage?

They have said they are maxing at £4000 pm repayments, if they can build more deposit. Looking at mortgage of £800,000 I think.

She isn't asking for a bloody mansion, a 4 bed terrace, in catchment for a nice school and with a garden, it isn't a massive list.

That IS privileged. Expecting that as your first property is beyond entitled. Christ alive.

She needs a 2 bed terrace, maybe 3, not 4 ffs. She is pregnant with one child. People should buy houses and work their way up the ladder, not expect to start in their forever house.

Your money, your choice. But this is bonkers.

Edit: Just noticed your latest post! A £1Mil house for a starter home? 😂😂

Thanks, OP. I needed this laugh!

OP 800K is the absolute maximum (close to 5x) their joint income, and what a mortgage calculator would say. An AIP could potentially be obtained but it's meaningless.
None of this means a bank will approve that much especially with a baby on the way!
They'll only know for sure when they actually apply for mortgage once a property is accepted, a mortgage broker will be able to advise.
Also what happens if the property they want gets downvalued?

Those mortgage repayments are unaffordable if your assessment of their income is correct. I earn more than them combined (based on your estimates) and I wouldn’t commit to paying that. They will have very little margin for error.

Unless the SD's husband has some other income we don't know about. Investments? Maybe planning a career move that will take him to 300K earnings?

OP if you are to help you should know the full picture before you commit to anything.

Apologies I missed your later updates by not refreshing the thread. Fully understand your views, she is a lucky girl.

Two things, your parents will in all likelihood disinherit you as they will see it as offsetting what your niece and nephew did not get. People do odd things.

I know the Greenwich area well and that's a lovely house in catchment for an extremely hard to get into primary school with a lovely park next door. Their catchment was about 50m radius at one point.

What I would say is that unless the deposit is humongous they are not going to be able to meet their mortgage AND CHILDCARE costs with one or even two small children on their combined salaries. Nursery in that part of London will be in the region of £100 per day and it's not practical to have children under your feet just because you work from home.
Stamp duty alone on a house of that price will cost them a substantial whack on your gift.

So given she is pregnant, I would suggest the simplest thing is to ask if they have worked through all their costs to the last penny and figured out how much disposable income they will have. It's very easy to forget just how much more expensive the council tax will be on a home of that size for example.

It may be much easier to buy something at a lower value and improve in years to come when they have more disposable cash. This is on the same street but without the loft conversion so still 3 beds. It's priced for the school catchment though.
https://www.rightmove.co.uk/properties/148919366#/?channel=RES_BUY

Lastly, it is incomprehensible for people outside of London to live with no outdoor space, or very little at all. But in London it's the norm and there are great parks both large and small almost everywhere. With two working and young parents, they will be out spending time in parks and playgrounds for most of their weekends.

I would be worried about the possibility of something unexpected happening to them, such as job loss, with such a massive financial investment.

Ordinarily, I would agree. But, if there is money available to allow them to move once into a 'forever' home, the tens of thousands saved in taxes and moving costs, and OP is willing to offer that money, it isn't unreasonable. It doesn't sound like the SD is asking OP to sell up and give her the money - that would be entitled - more than OP wants to help and see her SD live comfortably. Sure, it is unusual for families in their 20s these days, but I look back at what my parents could afford on a single salary and it is not dissimilar to what OP is posting here. There never used to be any need for starter homes. They rented flats for a couple of years after marriage and then moved to a 4 bed detached house with garden.

It seems implausible that anyone looking to buy in London would be searching in these two areas which are more than 12 miles apart - a 2.5 hr hike in rush hour!

Not the point of the thread, but hey, I dislike discrepancies.

To the OP, you can help your daughter and still leave your niece and nephew the same bequest when you die by leaving them a share of your marital home instead, and explain to your daughter you are giving her an inheritance earlier.

Win win.

That would be really massively stretching themselves and I wouldn't recommend that, that would probably be their absolute maximum borrowing amount. They need to look for a cheaper house.

It seems implausible that anyone looking to buy in London would be searching in these two areas which are more than 12 miles apart - a 2.5 hr hike in rush hour!

Perhaps they like both areas and need to get into central London - I don’t think that’s particularly implausible

I think this is your house, your money and your relationships so YOU have the say as to what you do with it. Are you close to your niece and nephew? I would imagine that over the past 20 years you have probably had far more to do with SD growing up than you have with them - you are her second mum and obviously have a lovely relationship. I'd sell the house and give them the money if you are sure you are comfortable for your older age.

I did wonder what the point of posting all those houses in the chat was though.
It looks like even with OP's contribution they'd be cutting it close. What were they planning to do otherwise?

The issue here IMO isn't just the affordability on paper it's potential future scenarios regarding continued employment and disposable income.

What your parents could afford is irrelevant in 2024 even 'up north' or in cheap areas most people don't do that.

Many people max out affordability when the children are older. Not only does affordability improvise somewhat with childcare out of the way, parents are also more advanced in their careers and earning more. It's very hard to say which way it'll go when the kids are young. Many find juggling young children and a demanding job too much, so cut their hours. Which is hard to do with a massive mortgage.

Do they want the big house so badly that they're willing to make a lot of other sacrifices?

@JustAnotherLawyer2

They work in the centre, one is SD preference the other is her husbands, one is very close to where they are now and her husband is dragging his feet at giving up Greenwich park, SD wants the SW and district line!

Have they said how long they think they'll take to save enough deposit?

They must have a sizeable amount already if they're planning on an £800k mortgage and looking at £1m + properties. I think stamp duty on £1m will be £41k

Would your help just be to reduce the mortgage?

Not that that isn't lovely of you, but is sounds like they can get the property they want on their own anyway.

It might make more financial sense as PP have suggested to give her the monthly rent and then leave it to her in your will.

When we first started house hunting, we shared all sorts of properties with family, some that we could afford, some that were a stretch, some that were pipe dreams. Not out of any expectation or hinting for help. Just part of conversation. We don't know if the SD has also shared 'for now' properties. They may well still be trying to weigh up all their choices, keep saving for a bigger deposit vs moving to a smaller place, and are asking family opinion.

Nice edit there. 🙄

My parents are in the SE. Not up north. My point was about how things have changed generally for the younger generations. If parents are in a position to offer to make life easier, why shouldn't they?

I think that’s a lovely idea OP and ultimately what you do with your property is your choice. As others have said, you could state in your will a % to go to your niece and nephew too.

The problem is (at least for me in this scenario) even with OP helping, they likely still wouldn't be able to cope with mortgage costs. Imagine if mortgage rates went up to close to 7% again, they'd be buggered - they're already trying to max it out if possible. They want to max out on 5x salary - but they likely haven't considered things like council tax going up (definitely going to happen), childcare costs going up etc and are likely banking on promotions or pay rises which is risky/borderline bonkers.

OP should be trying to encourage them to be responsible (and thereby pointing them towards a property they can actually afford), not potentially leading them down a very miserable path. They can't afford a forever home. If they could I would think differently.

Just to comfort everyone.

I mentioned to DH about affordability, he thinks right now they have about £300,000. I didn't know but when her maternal grandparents passed she got more inheritance and they have been saving and have around £100,000 of their own saved.

They are in a rental near Greenwich park right now which is a great deal, £2000 pm for a 3bed so have decided they will stay there until they can go to something bigger.
Right now they save £2000-£3000 a month.

DH thinks SD makes around £65,000 and her partner closer to £115,000 + a nice bonus. But that is a relatively new promotion of about a year or so.

I perhaps had the wrong end of the stick on some of it, I don't really do money talk!

DH and I have already said we will pay all childcare costs (not private school, if they take that route we are out on principle but nursery and wraparound care).

This feels like an awful lot to post about them but I see peoples concerns.

Now I know that they actually have more than I thought I might so a split, keep some for us, a little for niece and nephew and then some for SD.

That's on me for not having all the info to begin with - sorry!!

My dad is step dad to my sister and has been her only father since she was 6.
In every single way he is her dad and he has treated her as his daughter
He gave all of us the same amount when looking to buy a house to him it didn't matter than she isn't blood she is his daughter. It sounds like your step daughter is the same.

To me the question isn't whether your step daughters or niece and nephew inherits the property. The question is when do you pass on the property to your step daughter and how much of the property to pass on now and how much to put to one side and leave in a will to leave her later. It probably is worth sitting down with a financial advisor, go through your financial situation with a fine tooth comb. Pressure test everything and work out what to gift now and what to save in a rainy day fund.