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Original poster

Can you get a mortgage on your own home to buy apartment for student DC?

10 replies

stormsurfer · 22/01/2023 12:00

I'm just wondering if it would be a better way to find my DDs living costs as a student.

Could I borrow against my own home (mortgage paid off), buy her an apartment to live in while a student, then keep the apartment as a way to earn rent to give me a bit of income in retirement.

Is this possible? Is it a crazy idea? Does it count as a buy to let if it's for your own DC?

OP posts:
HerNameIsIncontinentiaButtocks · 22/01/2023 12:09

Friend's parents did that when I was at uni, although they went for a three-bed semi and we lived there and paid low rent. Which I know may not be entirely relevant two decades later, but still.

ohdizzy · 22/01/2023 12:11

It's not that simple. I can't remember what the rules are but we looked into it and it was a non starter. Sorry I can't remember the details!

Original poster
stormsurfer · 22/01/2023 12:59

@HerNameIsIncontinentiaButtocks @ohdizzy thanks for the replies. I was Googling and getting no where. Does it count as equity release I wonder?

Anyone else know anything about this?

Thanks for your help!

OP posts:
titchy · 22/01/2023 13:09

Rather than do it specifically for your dd (which it wouldn't be long term), if you simply raised the 20% deposit (presume you'd meet the affordability?) and used that to buy a btl, and the projected yield covered the interest plus annual costs I don't see why not.

You could get an agent to manage it which would make it more of a formal investment plan, and prob should do that anyway given you don't know who she'd choose to share with.

But, only do it if you're happy to be a student landlord long term.

Badbudgeter · 22/01/2023 13:15

I had thought about this. In order to make it work it’d be better to gift the property to your child with a secured loan repayable when property is sold or in x years. That way there would be no cgt liability as child would be entitled to an exemption for their principle residence. Hopefully increase in property price would fund a deposit for next place. More than 1 bed they could have a lodger to pay bills and maintenance.

it’d obviously cost you as you’d be paying interest on mortgage on your place. You’d have to do your sums to figure out if it’s cheaper than paying rent/bills.

Hack221 · 22/01/2023 13:38

Yes you can, I’m a broker if you have any further questions more than happy to chat to you just drop me a message

mintbiscuit · 22/01/2023 13:52

I cannot believe that in this current climate it would be more cost effective to buy for a student than rent. You’d have stamp duty plus all the overheads of a landlord.

WhatACarrieon · 22/01/2023 14:20

Badbudgeter · 22/01/2023 13:15

I had thought about this. In order to make it work it’d be better to gift the property to your child with a secured loan repayable when property is sold or in x years. That way there would be no cgt liability as child would be entitled to an exemption for their principle residence. Hopefully increase in property price would fund a deposit for next place. More than 1 bed they could have a lodger to pay bills and maintenance.

it’d obviously cost you as you’d be paying interest on mortgage on your place. You’d have to do your sums to figure out if it’s cheaper than paying rent/bills.

This is not advice, it's knowledge and experience. Get advice from a qualified adviser. However:

When gifting property, please remember the Lifetime Inheritance Tax implications of this. You can look at the Inheritance Tax (IHT) manual (any tax manual) on the gov.uk website and just use the search bar to find what you're looking for.

Lifetime IHT is triggered if the donor dies within 7 years of making the gift, subject to various exemptions. There's a tax-free threshold in place for the gifts in the 7 years before death and those that comprise the death estate.

Depending on when it's gifted, and if it's shared or the whole, the value of the property gifted is valued at the date of gift - that value can then be revalued on the date of death. (Not to mention any other CGT considerations with owning second properties, and/or in Scotland, the LBTT Additional Dwelling Supplement). Consider if it's better to gift (an) outright sum(s) of money to an account held by the recipient which is suitable to pay for the property, any renovations, decorations and furnishings, etc. Cash is king, and the value gifted is stable on date of gift and date of death.

The thing to consider is that if property shares are revalued on date of death, they can go down as well as up. The value of cash is stable at date of gift and date of death (assuming the transactions are GBP)

Get advice from a qualified adviser

WhatACarrieon · 22/01/2023 14:22

"This is not advice, it's knowledge and experience. Get advice from a qualified adviser. However"

I realise I totally sound like I'm saying @mintbiscuit is talking pants. Sorry! I was trying to put a disclaimer at the start of my post but didn't leave a big enough gap.

Sorry!

Original poster
stormsurfer · 22/01/2023 20:39

Oh gosh! A lot to think about. I'll look up what you have all suggested.

I was expecting the property to be below the stamp duty threshold and I was thinking of only a one bedroom as my DD would live there alone, not have lodgers, as she is autistic.

I was then thinking it would be a rental for people other than students. Wasn't thinking of going for HMO type house.

Does that change anything?

OP posts:
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