To buy house for children this way

[creando]

just wondering about this, could be a non starter BUT my daughter (21) just graduated and wanting to move in with boyfriend. She’s always been a hard worker, has had jobs since 16 etc. I am not keen on her renting as it’s more costly that purchasing and house would also go up in value. She has a LISA and some money saved however her choice of profession is freelance so she wouldn’t have mortgageable accounts for a few years yet. We are not rich by any stretch but we have a lot of equity on our house. We’re both keen to help out but 2nd home tax is a worry. Could one of us take our name OFF our mortgage to purchase house for DD? Is this even a thing?

You need legal advice, but honestly, as you don’t know what your future holds, I would keep my own house for me and my husband.
Let your daughter find her feet career wise, and in a few years she may well be stable enough to buy for herself, or she may have decided to take the equity and emigrate to Australia.
Gifts can’t have strings or resentment of what she does with the gifted money could cause unforeseen consequences

I saw an advert about some kind of guarantor mortgage thing where parents can help their kids but can’t remember who the lender was

Thanks for this - there would be no strings. I just don’t see the value in renting when she could be living in an investment. I suppose my question was really if it can be done or not

That’s interesting and sounds like it may be a solution. Thank you

I know someone who did this and it worked out fine but I don't know what second home tax is, maybe that wasn't a thing when they did it

Are you married?

Yes married. DD has enough for a deposit it’s just securing the mortgage which might be a faff

I think if you're married then it doesn't matter who's on the mortgage, you both own it so any property would count as a second home

Yes - that’s my understanding. A cohabiting couple can have a property each but a married couple can’t. There are also possible stamp duty issues if you come off the deeds completely and gift your share to your DH (and if you weren’t married capital gains tax potentially)

given she is moving in with her boyfriend and given her age I’m not sure I would be tying her into a property so soon. Give her a little freedom for a couple of years

If the guarantor mortgage is possible then go for it but she needs to think about protecting your investment and her deposit if her partner isn’t contributing. Would she buy it and they live with her?

She's so young I wouldn't buy yet, they might want to move around a bit with jobs or just try living in different places. I'd suggest they rent a room in a shared house with bills included. Check out spareroom or openrent, it's much cheaper than a mortgage and paying all the bills IME.

One bedroom flats have also been going down in value if that's what they were thinking of buying and ground rents and service charges going up and up.

True. If she’s freelancing there’s no guarantee she’ll be staying where she is for a while.

This is all hugely helpful thank you. Looks like guarantor mortgage could work. If she does decide not to stay at least she can then sell and maybe make a profit. The area she’s looking at is very up and coming. Entirely up to her but nice to have an option to support her if needed

OP you sound a bit naive about the property market. Houses and flats don't always go up in value, as people who own flats right now and have lost money over ten years are discovering. Stamp duty is very high and so are the other costs of moving. If your daughter thinks there’s any possibility she might want to move elsewhere within three or four years (and how many 22 year olds are really ready to settle down?) then buying is a terrible idea which is likely to lose her money.

RE your husband buying it for her - it would still count as a second home for tax purposes as he wouldn’t live in it, and because he would still be married to a homeowner. So 5% extra stamp duty, capital gains tax etc.

I agree that as a pure investment property isn't great, but if the house they're buying is typical FTB fodder, so not too big or expensive, then they'd be really unlucky to lose more than they would have paid in rent over three or four years. I'd be thinking along the same lines as the OP (but not expecting anybody to get rich from the arrangement).

I’d let her rent somewhere with him together and see how they get on. It may be the making of them and they realise they do want to put roots down together and buy in a couple of years, in which case he should have equal opportunity to begin the investment too, or living together might uncover problems and they break up and can both walk away easily from renting.

You also have to factor in that if she/you sell in 2-3 years the estate agent and conveyancing fees will probably be more than any potential increase in property value.

Not naive at all, but just unsure about this aspect of the market. Trying to look at best option for my child. Rent doesn’t make sense when she’s saved for a good deposit. It just seems like a bit of a waste but I do take your points on board and appreciate you posting

House not flat on fringe of very sought after area

I wouldn't have wanted a mortgage at 21. What if she decides to go travelling in a year or two, or move miles away for work. Young people are also potentially more likely to split up, so what if you guarantor and he buggers off without paying his half of the mortgage? It can be a bit of a mill stone so young. Also, you say you aren't keen for her to rent, but what does she think?

I think you need to think beyond the financials tbh. Give your daughter a couple of years renting with her boyfriend - it gives them an equal footing and it means she has to take responsibility for her housing completely

if you part own there is going to be an imbalance with her boyfriend. If something goes wrong she’ll be on the phone to you. You may not think you are overbearing but maybe that shared ownership will create a little rift.

I tried doing this with my mum a few years ago. She owned her house outright, so there were no issues with equity or an existing mortgage.

The problem came when we approached the bank for a guarantor mortgage. Because of my mum’s age (56 at the time), the lender would only offer the mortgage over a much shorter term. They had a policy that the mortgage had to end by age 70, which meant the term was 14 years.

As a result, the monthly repayments became far too expensive.

Thanks all - to clarify a few points, she’s keen to purchase and use her money wisely so if we can help I’m happy to do so. The house would be hers. It’s possible to bf might also purchase separately as he is a saver also and his parents will assist. They have both travelled extensively during holidays (se Asia, oz etc). She will want to stay here and pursue her chosen career. Obvs there’s every chance they may not last but if she has a house that’s security for her. DH and I were very lucky to get on the housing market early and our first house cost buttons - we want to support her in any way we can as she will not have the same opportunities as we had.

I bought a flat at 22 with my mum as guarantor but with the expectation that my BF would live with me and pay towards it.
Then we broke up.

That flat was an albatross round my neck and kept me stuck in an area and a career that I no longer wanted.
Couldn't go travelling when friends did.
Couldn't afford all sorts of stuff that my friends were doing in their 20s.
Couldn't retrain when the opportunity came up.

My eldest graduated a couple of years ago. Since then he has moved back and forth between uni city and home city, lived with girlfriend, best friend, various combinations of friends and had a lovely social life. He's had the opportunity to do short term work placements here and there while he's been deciding what to do. Now has a steady job with a potential for a good career and is sharing in a different place with another couple of friends.
He isn't trapped in a flat watching his friends explore their options while they can

There are no easy ways around it, speak to a FA.

I disagree with those saying a mortgage at 21 is a bad idea. I'd say get on the property ladder asap, never understood all these people who are FTB at 39, what have they been doing for the last decade? Paying someone else's mortgage that's what. If they're settled in one place with a secure job, buy the most modest thing they can afford, better than renting IME.