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Original poster

Buying a flat for our daughter

30 replies

Motnight · 22/07/2023 09:38

We are in our late 50s. Still working, me full time, DH part time (health issues). We recently came into an inheritance which was unexpected. As a result we are mortgage and debt free and have savings.

Our DD is in her mid 20s. Works in the NHS. She will never be able to afford to buy any property in London where we live. She currently rents a room in a shared flat. She is saving but tiny amounts as her salary is around £28 000. She has a small life time ISA.

We are considering buying her a flat, that she will own outright. It's very early days so haven't thought things through. What do we need to be considering? Could we buy the flat for DD but her pay us rent (much reduced from market value)? Would we have to gift DD the money so she buys the flat in order for her to use her ISA?

DD loves London, has her job, friends, family, partner here. She doesn't want to move away from it! So if we buy her a flat it would have to be in London.

Any thoughts please about what we need to consider? Thank you.

OP posts:
RandomUsernameHere · 22/07/2023 09:54

If you buy her the flat, the gift would be exempt from inheritance tax if you live for 7 years after giving it. I don't think that would apply if she paid you rent, as you would still be benefiting from the "gift".

sashagabadon · 22/07/2023 10:08

I would definitely buy my dd a flat in the circumstances you describe. What a lovely thing to do especially as it was unexpected windfall. The pleasure I would get from helping my children is worth more than hard cash. I would maybe encourage a small mortgage so she does understand about paying for life. So if you have say £400k to spend , but something for £500k so she pays the extra herself via a mortgage ( plus gets a better property or better area)
I would let it be fully hers though not mine and hers

NancyJoan · 22/07/2023 10:12

Don’t muddy the water with charging her rent. If you can afford to buy it outright, then do. Otherwise give her a very significant deposit, and then let her get a mortgage for the rest.

Original poster
Motnight · 22/07/2023 10:25

Thank you for all the really useful responses so far, lots to think about.

OP posts:
allgrownupnow · 22/07/2023 11:35

If you buy it there will be lots more stamp duty to pay, hers will be minimal as a first time buyer.
Have a clear idea of how much you want to give her and then she can decide whether to buy outright or get a smal mortgage (per pp). Give her some agency and decision making in this situation, let her chose the house etc.
it is a wonderful thing to be able to do for your child, but do it open heartedly and trust her. Being overly cautious or protective- choosing the property or charging rent - is keeping her attached to the apron strings rather than facilitating her to spread her wings and be independent.
I am not saying you sound like this, just sharing my thoughts based on situations I have seen.

lookingforaholiday · 22/07/2023 17:19

Fantastic parents, I'd love to be able to do this for my son one day.

When you mention charging her rent it suggests the flat would remain in your name? So are you actually talking about buying a flat that you would own and let her live in? I'm which case that wouldn't be a gift until ownership is transferred at some point in the future. This would be more expensive from a stamp duty perspective as there is an extra 3% payable on second properties.

I agree with some other posters that I would make her a cash gift no

lookingforaholiday · 22/07/2023 17:20

Sorry hadn't finished.. I agree with other posters that making a cash gift would be more straight forward. She can then buy the flat in her name, secure lower stamp duty etc. Having a small mortgage can be a good idea for credit rating but of course interest rates are high.

All the best to you and your family x

gingergiraffe · 22/07/2023 17:50

We would probably do the same in your situation. Not as well off financially as you but we do help ours out here and there where we can. You can’t take it with you and your daughter could benefit from it now, not in maybe 30 years time. The only thing I would think seriously about is her partner and where she stands in all this. Your daughter is young and relationships do not always last. It would be awful if, a few years down the line they split and your daughter loses half the house. A lovely gesture though.

renamedbutsame · 22/07/2023 18:01

Yes, do it. As a gift, or immediate inheritance. No rent, no mortgage. Enough of that. This is your blood.

BackT · 22/07/2023 18:14

Yes. You basically gift her the "deposit". She will be asked to show where it came from and you will have to provide that information.

As long as you then live for 7 years there is no issue.

It's a great thing to do. Life changing for your daughter and I suspect if she works in the NHS for £28k in london she already understands the value of money!

Twiglets1 · 22/07/2023 18:20

I did the same thing for our daughter under similar circumstances. I gifted her 200k so she could afford to buy a flat in London and she got a mortgage for the rest plus the savings in her LISA.

It was very straightforward and no tax had to be paid. But I had to write a letter to her solicitor confirming the money was a gift I was not expecting to ever be repaid.

cptartapp · 22/07/2023 18:30

PIL did this for SIL. Lovely. Except DH got nothing.
Any other children?

caringcarer · 22/07/2023 18:39

I recently gave my youngest DS £60 deposit to buy a 2 bedroom terraced house that needed work doing. DH who is his StepDad, has spent the last 4 weekends putting in a new kitchen, putting new quality laminate in lounge and hall. I paid for a downstairs cloakroom to be made in a very large cupboard in hall. He's had new carpets in both.befrooms, landing and down the stairs and a new toilet upstairs. Next he is changing all plug sockets and light switches to come ones. His Dad says he will landscape the little garden with his help. He just could not afford it on his own. He did save over £10k deposit in his LISA though. He is now saving to have the shower room redone. Could you give your DD enough for deposit so she could get a mortgage she could afford? If you can afford to do it then why wouldn't you? If you buy it yourself and let her live there rent free you will pay SDLT. As a first time buyer she won't.

Original poster
Motnight · 22/07/2023 18:49

Thank you for all the posts.

To answer some questions, DD is an only child.

Really interesting that a number of you are saying don't charge rent. And also about giving her a lump sum and letting her get a small mortgage. That seems like a great idea.

There's lots to think about and the responses and questions have been really useful.

OP posts:
stevalnamechanger · 22/07/2023 19:07

I would .

Just be mindful of leasehold flats and service charges

Caterina99 · 22/07/2023 19:09

If you can afford it then I’d gift DD the money for a significant deposit and then allow her to buy a property, either with or without a mortgage.

My parents rented a property to my brother. I think that was the right choice for them. My brother is terrible with money, not in stable employment, fairly new relationship with gf etc. But if you trust your DD and she is a stable and sensible person then gifting her the deposit will be life changing for her.

I wouldn’t buy a house in my own name and rent it to her. You will pay much higher stamp duty and then you will also pay income tax on the rental income. If at some point in the future you do gift her the property, you have to live for a further 7 years to avoid any inheritance tax.

Singleandproud · 22/07/2023 19:16

My parents did this for me with the inheritance they got when my grandparents died.

It was a 0% interest loan not a gift, a specific account was set up for me to pay my tiny repayment into (£50 a week) and we set up a Declaration of Trust which means if I sold the flat before paying the full value back my parents would get the remainder out of the sale before I got the rest of it.

It has made a huge difference, I haven't had to worry during the Cost of Living crisis as my housing costs are minimal and I've been able to afford a new kitchen and bathroom.

Do think about resale and service charges though if buying a flat as it can be tricky.

goteam · 22/07/2023 19:20

I'm sure they are happy now but I would also worry about her partner having a claim on the property if they live together. We will be able to help our DC with large deposits when they are older and already worry about this.

TeenDivided · 22/07/2023 19:22

Another option would be to set up a trust with the money, and for the trust to buy the flat. There might be some benefits from that (such as if she marries & divorces), but probably unnecessarily complicated.

Probably be easiest just to gift her the money.

terrichild · 22/07/2023 19:25

I agree about any partners liveing there . Also if she marries and it doesn’t work out , by law the spouse is entitled to half the property. This happened to a relative who bought a place for their daughter. Not trying to put damper on it but passing on another thing to make sure is considered when doing this.

kerrycgeorgie · 22/07/2023 19:30

No advice, just wanted to say that I think it's an amazing thing to do for all of you, it's not just about getting her on the ladder but most importantly it enables you all to stay living in the same city for the longer term.
I'm late 30s and having grown up in London so many of my friends and family have had to move out, including myself. If she goes onto have a family of her own she will really appreciate being close by, and so will you I am sure x

Cookerhood · 22/07/2023 19:32

Just to say that if she is to use the LISA she has to get a mortgage, however small. You can't use it if just buying with cash.

Riverlee · 22/07/2023 19:37

Have you any other children? Could you afford the same for them?

Just a thought, instead of buying the whole flat, could you gift her a deposit, so she can get on the housing market?

determinedtomakethiswork · 22/07/2023 19:39

I think a lot depends on the type of young woman she is.

If she is very entitled and selfish, then I wouldn't do this. If she is very responsible and would be grateful for the opportunity then I would do it.

I think, instead of charging rent, if you can afford to, I would insist on her massively increasing her pension. If she refused, that would affect my decision.

LegendsBeyond · 22/07/2023 19:43

Friends of ours did this & their son sold the flat after 2 or 3 years and has now blown most of the money while renting. They’ve fallen out with him & the whole thing has been a nightmare. Just be cautious.

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