Bank of Mum and Dad advice please

by Readers Question

2 months ago

Bank of Mum and Dad advice please

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Bank of Mum and Dad advice please

We have a small portfolio of 10 flats and a house in Hertfordshire which we have managed for several years now. We also have a development company that builds/renovates property to sell.

My daughter who works in London earning £45,000 a year is looking to buy a flat near where she works.

A suitable flat would cost between five to six hundred thousand. She will need our help to secure finance and I am interested in finding out which would be the best way of doing this.

We have funds to help with a sizable deposit, but ideally wouldn’t want to use too much if possible.

What schemes could be available to us, i.e shared mortgage, buy to let etc

Any advice would be most welcome

Neal

Comments

Neil Patterson

2 months ago

Hi Neal,
Buy to Let could be one option, but you can't live in a BTL property if you are party to the mortgage/owner. Therefore BTL would only be an option if you were the owners and not your daughter who would be a tenant.

However, if a close relative lives in the property ie your daughter then it would have to be an FCA regulated BTL rather than a standard commercial one and you would have to seek qualified, regulated and insured advice from a broker/IFA. This is because it would technically be seen as forming part of your personal finances and not purely a commercial business.

You could gift the deposit to your daughter and be party to the mortgage and joint owners to help the affordability calculations, but this would require a full regulated fact find to see if this was feasible.

You could also consider a commercial mortgage in the company name, but the rates would be 1-2% more expensive. However, you could be saving that in tax post section 24 mortgage interest relief restrictions.

I am not regulated to give mortgage advice, but if you do want to speak to an IFA who can you can always email me your details on npatterson@property118.com

Martin Rdg

2 months ago

You could buy the property jointly and then do a declaration of trust (I think that what it is called) stating that you own x% and your daughter X%. Due to my own circumstances I chose to own less than 1% for IHT purposes and my daughter the rest. I did it this way just to obtain the joint mortgage. I hope that makes sense

Paul Mullally

2 months ago

Neil,
Have you decided whether the money is a gift or a loan? If a gift you could investigate the option of a Lifetime gift which will then form part of your estate planning. You could look into creating a Trust with a Life Interest for your daughter which means the SDLT will stay at the normal rate.

If your gift is sizeable enough, can she then afford the balance of the mortgage on her own? If not, could you just go as a Mortgage guarantor without being named on the deeds. It's worth a chat through with a Mortgage advisor.

Paul.

ED SHIRMAN

2 months ago

Hi Neal , i have had a similar situation with my son . Dont forget their pride in being the "owner" and proving they can do it by themselves !Establish what residential mortgage she can get in her own name based on her income . this will of course depend on what deposit she can raise ,but thats where you come in . Also will show what monthly repayments she can manage with the mortgage . You will then know the "shortfall " and can decide how much you need or can put in . Is she central london as that price seems very high and perhaps if it is central london , look for the outskirts with good connections and you will get much more for the money and cheaper . There are loads of developments around london now .Then if you can work it out , just have an agreement between you and your daughter, assuming relationship is good , that you own x% of the flat and if she decides to sell you have an entitlement to that % , should you choose to take it , but the flat is solely in her name and then she will avoid , under current legislation capital gains tax on primary residence sale.Hope this helps. Good luck .

ED SHIRMAN

2 months ago

Sorry , Neal just re read and saw it is London , but my suggestion still applies , connections are really good now .

Ozzie Shepherd

2 months ago

Reply to the comment left by Neil Patterson at 12/09/2017 - 10:41
Thank you so much for your time and advise, food for thought
Regards
Neal

Ozzie Shepherd

2 months ago

Reply to the comment left by Martin Rdg at 13/09/2017 - 08:33
Thanks for your advice, food for thought
Best wishes

Neal

Ozzie Shepherd

2 months ago

Reply to the comment left by ED SHIRMAN at 13/09/2017 - 10:31
Thanks for your time and advice Ed
They still keep costing you even when they have flown the nest !
Best wishes Neal

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