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Original poster

Bank of mum & dad

42 replies

HaggyMaggie · 11/09/2020 06:40

So, bit of a complex one but I would appreciate any words of wisdom from people who’ve done it or any mortgage brokers with knowledge and experience.

I am well aware of the problems with getting mortgages involving gifts from parents, hence my post.

DD wants to buy her first house. The area she wants is not cheap for FTB, especially on their own (for the north). Her salary is just shy of 27k, band 5 NHS so still low on the pay scale. She can borrow 121k.

She has been living back home now for 14 months to save a deposit and has managed to save 16k herself. All auditable.

Now for the problem. A two up two down terrace will cost at least 200k and we would like to help but can’t afford to gift a huge amount, we have more than one child. The others have first houses but in different areas and have partners so shared cost.

What we can afford to do is buy a third of the property cash, and she buys 2/3. This would be an interest free loan for a period of ten years, taking us to retirement when we need the money back, and to a time when she may have a partner to share a home with or have progressed sufficiently in her career to remortgage and pay us back.

What we don’t really want to do is part own “officially” due to stamp duty on second properties and CGT when selling.

So my question is, has anyone worked around this? Can we loan her £66k? Would the bank accept this? Can she get an offset mortgage or parent help type mortgage whilst we keep our money in our account? Any other ideas?

We are mortgage free BTW, own house,, joint income of around £200k including bonus’ both age 55. DD is 23.

We are not leaving ourselves short or borrowing anything, we have the money saved up and decent pensions banked.

Just in case it gets mentioned, yes she could get a flat on her own, but the lack of garden, fees and leasehold together with being hard to sell makes this an unattractive option. One bed houses are few and far between in this area.

Any help appreciated. Or is it just impossible ☹️

OP posts:
TitianaTitsling · 11/09/2020 07:57

Only from what I've read here, I don't think you can loan her this, I think you would have to fully 'gift' it on the application something to do with the mortgage company not wanting anyone else to have an interest in it?

BarbaraofSeville · 11/09/2020 08:23

I'd be questioning why she wants to live in that particular area and why she thinks you should help her pay for it, especially as it's likely to cost you in stamp duty or make it harder to get a mortgage.

Wherever it is in 'the north' it is very likely that she can buy a 2 up 2 down in a perfectly nice, safe area with lots to do within a few miles of where she is looking for significantly less than £200k.

Or if you do want to help her but just want to avoid the difficulties, I believe that Barclays might do the product you're looking for, it's called something like a family springboard mortgage and you have to deposit the £66k with them in an offset type account and she gets a mortgage for the rest of the purchase price minus her deposit.

JustFrustrated · 11/09/2020 08:27

Yeah Barclays do the Springboard mortgage.

Its not just about the deposit. It's the affordability of monthly payments too.

AlwaysLatte · 11/09/2020 08:33

We've done this. We lent both my SSs large sums -SS1 it covered half of the property as in London but SS2 the whole property as not in such an expensive area. We had a solicitor draw up charges on the properties (London SS has recently upsized and so paid off the loan and we drew up another one for the new property so bear in mind you would need to do that). In due course we'll gift it to them but need the income at the moment as we have two younger ones. I would strongly advise getting good independent financial advice first and a good solicitor.

movingonup20 · 11/09/2020 08:36

You can gift her the money for her mortgage purposes and make a private arrangement with her for repayment but it will not be legally enforceable!

NameChange1966 · 11/09/2020 08:49

@BarbaraofSeville

I'd be questioning why she wants to live in that particular area and why she thinks you should help her pay for it, especially as it's likely to cost you in stamp duty or make it harder to get a mortgage.

Wherever it is in 'the north' it is very likely that she can buy a 2 up 2 down in a perfectly nice, safe area with lots to do within a few miles of where she is looking for significantly less than £200k.

Or if you do want to help her but just want to avoid the difficulties, I believe that Barclays might do the product you're looking for, it's called something like a family springboard mortgage and you have to deposit the £66k with them in an offset type account and she gets a mortgage for the rest of the purchase price minus her deposit.

We’ve discussed all this, we don’t feel we owe her anything. She absolutely doesn’t think we should help her. This was our suggestion not hers.

We can and want to help her. She would rent but I think this may be her only opportunity to buy where she wants when we have the spare cash. This area is where her job is, her friends are and her life is.

I have heard of Springboard thank you, I was interested to know who had done it, or had experience of it as I thought Springboard was where the parents typically put up 10% deposit. She already has a reasonable deposit herself.

NameChange1966 · 11/09/2020 08:52

@AlwaysLatte

We've done this. We lent both my SSs large sums -SS1 it covered half of the property as in London but SS2 the whole property as not in such an expensive area. We had a solicitor draw up charges on the properties (London SS has recently upsized and so paid off the loan and we drew up another one for the new property so bear in mind you would need to do that). In due course we'll gift it to them but need the income at the moment as we have two younger ones. I would strongly advise getting good independent financial advice first and a good solicitor.
Thank you Latte, that sounds exactly the sort of thing that would work for us. I will make some enquiries.

I appreciate your response. 🙏🏼

utterlynutty · 11/09/2020 11:41

Not sure how you could get your money back.
When we helped DS out with a deposit for his first property we had to sign a form saying the money was a gift and non returnable and we would have no stake in the property.

NameChange1966 · 11/09/2020 16:08

You lend the money and set out the terms of the loan but have a charge on the property (as does the bank that loans the rest) after a set period the loan will be repaid either by DD remortgaging because she has advanced in her career or she has a partner to share costs or she sells. You also have a written legal agreement to set out those terms. The charging order legally allows you to recover your money if the property is sold But after the bank gets theirs.

In any case this is our daughter, who is sensible and honest and who we trust implicitly.

Bells3032 · 11/09/2020 17:14

It depends on how strictly you need that money back. you can gift her the money and sign a form saying you don't need it back but informally want your daughter to pay it back in ten years (at which point her financial position should hopefully be different). There would be no implications of this unless you die within 7 years. but if she doesn't pay it back then you have no recourse.

If you want it to be an official repayment loan then it may be difficult for her to get a mortgage. An offset is an option but is likely to reduce the interest rate rather than increase the multiplier for the loan

S1p1der1 · 11/09/2020 19:45

On top of deposit don't forget need money for; survey, solicitor fees, mortgage arrangement fee, moving costs, post redirection, furniture (can buy ongoing)

5 years to save 60k at 1k per month
Property prices have historically increased

200k on a single salary
Can she get a second job ?

NameChange1966 · 11/09/2020 19:56

No chance of second job, she’s NHS and does 12 hour shifts, pretty much O/T when she wants it plus enhancements which gives a better income on her P60 but not guaranteed income.

Well aware of solicitors fees and survey, no moving costs or Mail redirection, she’s at home now. The garage is stuffed with her belongings, stuff she has bought, things from her uni house, handed down furniture.

The only thing we need help with is the bank accepting our legitimate But unusual Family arrangement.

I’m investigating Latte’s route which best suits our circumstances.

NameChange1966 · 11/09/2020 19:57

Thank you to everyone that responded though and any one else that’s done anything similar please keep chipping in.

S1p1der1 · 11/09/2020 20:45

If you gift the money
Plus the deposit
Will the mortgage be affordable, plus monthly bills ?
What if interest rates increase

Will she get a lodger ?

Clockwork99 · 12/09/2020 08:32

If you are planning a will where your DC will benefit is it worth reducing the share to DD by 66k until it is paid?

NameChange1966 · 12/09/2020 11:58

Potentially a lodger yes, she is a HCP so has lots of friends as colleagues many who live in house shares and could share with her.

The mortgage is affordable with her deposit and our loan, yes. Still affordable if interest rates rise (unless they rise to 1980s levels) and yes she can afford all her bills. She is very good with money and budgets. We cannot gift a deposit that size to just one of our children, and anyway, we may need it at retirement hence the ten year loan.

We have a will with all money split equally between DC. With a charge on any property our estate would want that money back anyway so it would be deducted from her share.

None of the above are issues. The issue is, with banks being as they are right now, with Covid and Brexit, how can we help her legally without falling foul of Stamp Duty and later CGT.

Still investigating Latte's response which is perfect.

I am kind of swaying towards putting the lot on hold for another six months to see if there is a housing price crash, when the whole situation may look different.

Pearsapple · 13/09/2020 12:18

Probably an unpopular opinion but with 200k income and no mortgage, can you really not give her the deposit to buy a 121k house?!

That’s just over 30k?

Feminist10101 · 13/09/2020 12:22

Does she know that with the current NHS pay arrangements she won’t get an incremental rise every year. Maybe 1-2% cost of living each April and a pay rise every 2 years (unless it stretches to 3 in the next negotiations). Her money will have to stretch further for longer due to inflation.

Feminist10101 · 13/09/2020 12:24

Banks won’t usually allow parental loans and legally you can’t make it formal as you aren’t authorised by the FCA.

Feminist10101 · 13/09/2020 12:24

Or FSA.

Pearsapple · 13/09/2020 13:05

I’m honestly astonished that someone can be mortgage free with decent income and want their child to pay back a loan to them to buy a house. If you don’t help your child, she won’t be able to buy for a very very very long time. It’s as simple as that and no fault of her own. What else is a better spend with 30k? Genuinely interested. You could forgo a new car or a holiday or a new kitchen surely. If it even comes down to making such a sacrifice which on 200k income sounds unlikely.

And I don’t mean to sound bitter, I’ve had helping hands from family and have a comfortable life because of it. I just can’t my head around loaning your child money for something as basic as a house purchase when you are not yourself struggling for money. She’s on 27k! Paying back 66k and student loads (I assume), why would you do that?!

legalseagull · 13/09/2020 14:45

Can't you loan her the money and just get the conveyancing solicitor to put a charge on the deeds so when it comes up for sale you get your money back?

NameChange1966 · 13/09/2020 15:17

@Pearsapple

Probably an unpopular opinion but with 200k income and no mortgage, can you really not give her the deposit to buy a 121k house?!

That’s just over 30k?

Eh? Your maths is not very good.

The house is 200k, she can get a mortgage for 121k and has £16 saved on her own.

When you get to our age and are putting a substantial % of your income into your pensions so you can retire comfortably and Also pay tax on those incomes, £200k joint income really isn’t massive.

Also, I said we have other children, So no we can’t afford to give each of them 70k just like that 😂

NameChange1966 · 13/09/2020 15:18

@legalseagull

Can't you loan her the money and just get the conveyancing solicitor to put a charge on the deeds so when it comes up for sale you get your money back?
Thank you, I think this is the way we will go.
AbbieFB · 13/09/2020 15:25

If you trust her implicitly then give her the money as a gifted deposit and have an agreement between yourselves for the repayment in 10 years.

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