Bank of mum & dad

[HaggyMaggie]

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 ☹️

@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?

Please RTFT.

To clarify:

Joint income 200k With other benefits such as company car and Heath are. Very nice, but when you factor in the tax on those incomes and benefits and the pension contributions we are making the net income isn’t as high as you think.

House is 200k, DD deposit is 16k she can borrow 121k so taking out a few grand for costs we were looking at thirds so our loan would be 66.66k.

We have more than one child.

Absolutely no idea where 30k comes from. If it was that and we had one child we would gladly give that but three DC x 66.6k is £200k gifted.

We don’t have that stashed under the mattress funnily enough, and yes you sound bitter. Student loan? Minimal because guess what? We funded all D.C. through uni and she also did an NHS degree so no tuition fees.

Thank you to the sensible posters that came on with valid information.

Sorry *@legalseagull*I quoted you twice by mistake. The first quote was meant for you the long one above wasn’t!

I appreciate your response about the charge. 🙏🏼

She should buy a property she can afford and work her way up herself. Starting with looking at a cheaper area. All part of being a grown up..

I wouldn't want to be paying a mortgage back and my parents a loan too? She'll never be able to upsize!

Why aren't you encouraging her to look at something she can actually afford?

I've read the full thread but still don't understand this - if trust is not an issue, why not lend her the full amount now and ask for it back in ten years? My parents lent me £30k on this basis when I bought my first flat, and weren't shy demanding it back five years later. No legal arrangement, as trust wasn't an issue.

I agree with cookies47, if this isn't something that you would be able to loan to all the children I'd suggest she looks for somewhere more affordable.

Some odd replies!

Maybe seek financial/legal advice OP, however like you’ve mentioned, at the moment would probably hold fire, encourage her to keep saving. During the 2008 credit crunch our GDP dropped 8%, there are reports during covid it dropped 20%, from 2008 house prices were still depressed until about 2013/14. Of course there were other factors at play, dare say we’re currently in a huge bubble. Seems the government are doing what they can to keep things moving but surely the only way is up for interest rates and employment figures are upsetting.

Prices have been a runaway train since H2B was introduced. We’ve recently secured a 5 year fix and prepared to batten down the hatches.

Low interest rates and no stamp duty are attractive but I can’t help but think it’s risky buying now. It is of course for you and your family to weigh things up which I’m sure you have.

It’s lovely that you are in a position to help your children, hopefully we’ll be in a position to help our 3, just probably not on such a grand scale :) . If I had help as a young adult would be very grateful and as parents we want to do what ever we can to help our children.

She should wait until next summer as house prices due to come down 14%

Agree with pp, she's 27 - there is no hurry to buy especially with the housing market dipping in the next 12 mths. There is a reason most FTB are older than her and/or buy as a couple.

@Cookies47

She should buy a property she can afford and work her way up herself. Starting with looking at a cheaper area. All part of being a grown up..

I wouldn't want to be paying a mortgage back and my parents a loan too? She'll never be able to upsize!

Why aren't you encouraging her to look at something she can actually afford?

RTFT

Interest free loan from us, ok? I explained the reasons in the OP.

@p0ptart

I've read the full thread but still don't understand this - if trust is not an issue, why not lend her the full amount now and ask for it back in ten years? My parents lent me £30k on this basis when I bought my first flat, and weren't shy demanding it back five years later. No legal arrangement, as trust wasn't an issue.

That is exactly what we want to do, but banks and BS are not keen, I’m asking how you did this if you did It.

Would your bank be happy for you to take 66.66k on a loan and will still give you a. mortgage?

In the current climate the answer is no, hence my OP.

@Stinkerbells

Some odd replies!

Maybe seek financial/legal advice OP, however like you’ve mentioned, at the moment would probably hold fire, encourage her to keep saving. During the 2008 credit crunch our GDP dropped 8%, there are reports during covid it dropped 20%, from 2008 house prices were still depressed until about 2013/14. Of course there were other factors at play, dare say we’re currently in a huge bubble. Seems the government are doing what they can to keep things moving but surely the only way is up for interest rates and employment figures are upsetting.

Prices have been a runaway train since H2B was introduced. We’ve recently secured a 5 year fix and prepared to batten down the hatches.

Low interest rates and no stamp duty are attractive but I can’t help but think it’s risky buying now. It is of course for you and your family to weigh things up which I’m sure you have.

It’s lovely that you are in a position to help your children, hopefully we’ll be in a position to help our 3, just probably not on such a grand scale :) . If I had help as a young adult would be very grateful and as parents we want to do what ever we can to help our children.

Thank you Stinker, for getting it without difficulty 😀

I do also get exactly what you are saying, I think It would be wise to hold fire a few months, get some financial advise and see where 2021 takes us.

She could save another 12k over 10 months and then see if house prices ha e come down at all. Better for you to gift her 10k or lower

I'm an NHS employee with 2 jobs, complex salary enhancements plus help from my mum with the deposit and buying my first home. Couldn't have done it without my broker - Alan Dee at Manchester Mortgages. Literally nothing phased him - he made getting the mortgage seem like the easiest part of the process in the middle of a pandemic with products disappearing on a daily basis. I could not recommend him more.

@SwayingInTime

I'm an NHS employee with 2 jobs, complex salary enhancements plus help from my mum with the deposit and buying my first home. Couldn't have done it without my broker - Alan Dee at Manchester Mortgages. Literally nothing phased him - he made getting the mortgage seem like the easiest part of the process in the middle of a pandemic with products disappearing on a daily basis. I could not recommend him more.

Thank you, we are only over the Pennines, I will look at Alan!

Could she buy in a cheaper area and rent out the house?

Unfortunately I am not sure how buying a house in a cheaper area and renting it out would in any way help us to achieve what we are trying to achieve, unless I’m missing something?

My parents have just given my sibling 1/4 million 🤭😯 towards a house. I believe the term is a gift deposit. They have no stake in the house and the will has been adjusted to state I will get the same amount of the death of both, although I suspect there won’t be a fraction of this amount left. They are pensioners with a good pension but this is about 50% of their own house’s value. If you do the same, there is no legal way to get the money back apart from a trustworthy child. My situation is very different and my concern is about potential care costs in a few years. £250k could be very much needed. And no, I haven’t been offered the same amount (not that I would take that sum) but am certainly quite upset. My sibling is in their mid forties and this is an upgrade, not a first property.