House-buying question

[davejhopwood]

Hi

My daughter has found a house that she wants to buy. She can only afford a small mortgage as she is in training. We will be paying a large deposit but I don't know whether to gift the money to her so she can pay it or whether we should pay it directly. I understand that if we gift it, her boyfriend would be entitled to half of the house should their relationship change. If we pay it directly, I presume we would be joint owners and I'm not sure if my daughter could use her free LISA funds. Input from anyone who knows what they are talking about would be appreciated.

Cheers.

[Countdown]

davejhopwood said:

Hi

My daughter has found a house that she wants to buy. She can only afford a small mortgage as she is in training. We will be paying a large deposit but I don't know whether to gift the money to her so she can pay it or whether we should pay it directly. I understand that if we gift it, her boyfriend would be entitled to half of the house should their relationship change. If we pay it directly, I presume we would be joint owners and I'm not sure if my daughter could use her free LISA funds. Input from anyone who knows what they are talking about would be appreciated.

Cheers.

I was in a similar situation a couple of months ago. Unfortunately due to time pressures the quickest and least complicated solution was for me to gift her the funds.I’m relying on the fact that she works in Family Law to make sure she’s adequately protected in regards to future relationship issues

[davejhopwood]

Countdown said:

I was in a similar situation a couple of months ago. Unfortunately due to time pressures the quickest and least complicated solution was for me to gift her the funds.I’m relying on the fact that she works in Family Law to make sure she’s adequately protected in regards to future relationship issues

Hope it works out OK!
According to a few sites I've visited, you can use a LISA for a joint mortgage. From here: lifetimeisa.campaign.gov.uk/
'If you’re buying a home with someone who has owned a property before they don’t count as a first-time buyer. But you can still put your own bonus towards the price of the home you’re buying together.'

[JezHill]

Best you seek legal advice but my understanding (30+ years as a mortgage broker) you have little claim on the money directly if things go badly between her and her boyfriend.

A charge on the deeds is a possible option but unless your names is on the mortgage and deeds you have little control.

Worth investigating a deed of trust between the both of them and buying tenants in common vs joint tenants. Taking advice on this now is important as it’s difficult to change this later on.

Hope that helps!

[davejhopwood]

Thanks very much for your feedback. Things aren't as easy as they could be!

[Sir Bagalot]

Easiest way to do it is gift it to your daughter and protect it by asking her to ensure she owns more of the property.

For example

Property is £200K

Her deposit is £8K - 4%

His depsoit is £12K - 6%

Your gift to her is £35K - 17.5%

Mortgage is shared

So before the mortgage he's putting in 6% and her 21.5%, mortgage covers 72.5%, so 36.25% each.

When paperwork is done ask her to ensure she owns 57.75% of property

[pb8g09]

Gift it and then ask the solicitor to write up a declaration of trust between your daughter and her partner as unequal tenants in common. That should protect your money so long as they both adhere to the terms of it.

Costs about £150.

[davejhopwood]

Thanks for the input. It looks like it's a solicitor job after all.
Cheers!

[Killer2005]

The issue will be that if you are gifting the deposit, you will be telling the lender that you have no interest in the property. If youre adding a declaration of trust, then that wouldn't be acceptable to the lender.

[pb8g09]

Killer2005 said:

The issue will be that if you are gifting the deposit, you will be telling the lender that you have no interest in the property. If youre adding a declaration of trust, then that wouldn't be acceptable to the lender.

The declaration of trust is between his daughter and her partner, not the parent.

If parent (OP) wants his money back, he'd get it from his daughter. OP therefore has no claim on the house and isn't mentioned in the DoT.

[Killer2005]

pb8g09 said:

Killer2005 said:

The issue will be that if you are gifting the deposit, you will be telling the lender that you have no interest in the property. If youre adding a declaration of trust, then that wouldn't be acceptable to the lender.

The declaration of trust is between his daughter and her partner, not the parent.

If parent (OP) wants his money back, he'd get it from his daughter. OP therefore has no claim on the house and isn't mentioned in the DoT.

[98elise]

Sir Bagalot said:

Easiest way to do it is gift it to your daughter and protect it by asking her to ensure she owns more of the property.

For example

Property is £200K

Her deposit is £8K - 4%

His depsoit is £12K - 6%

Your gift to her is £35K - 17.5%

Mortgage is shared

So before the mortgage he's putting in 6% and her 21.5%, mortgage covers 72.5%, so 36.25% each.

When paperwork is done ask her to ensure she owns 57.75% of property

If they subsequent married, would the house be treated as a joint asset, trumping the % ownership?

[btdk5]

98elise said:

If they subsequent married, would the house be treated as a joint asset, trumping the % ownership?

No the designated split would still exist.

Pointless trivia - US persons often buy property in the UK as tenants in common with a low percentage ownership if they have married a UK spouse. As property sales worldwide are taxed at capital gains for a US person even if it’s your primary residence.

[98elise]

btdk5 said:

98elise said:

If they subsequent married, would the house be treated as a joint asset, trumping the % ownership?

No the designated split would still exist.

Pointless trivia - US persons often buy property in the UK as tenants in common with a low percentage ownership if they have married a UK spouse. As property sales worldwide are taxed at capital gains for a US person even if it’s your primary residence.

Thanks, that interesting. I expect I'll have to help my kids with deposits, but any money I give them I'll want to protect it (for them more than me).

[soprano]

btdk5 said:

No the designated split would still exist.

The ‘designated split’ would still exist in terms of property ownership, but if they married and separated, upon divorce the courts would have complete discretion as to how to divide the asset, irrespective of the legal or beneficial title.

[soprano]

Sir Bagalot said:

Easiest way to do it is gift it to your daughter and protect it by asking her to ensure she owns more of the property.

For example

Property is £200K

Her deposit is £8K - 4%

His depsoit is £12K - 6%

Your gift to her is £35K - 17.5%

Mortgage is shared

So before the mortgage he's putting in 6% and her 21.5%, mortgage covers 72.5%, so 36.25% each.

When paperwork is done ask her to ensure she owns 57.75% of property

This isn’t necessarily wrong but you would have to be careful in the drafting of any declaration of trust, because the 21.5%/6% capital contribution is with reference to the gross value, but upon a sale the mortgage would be paid before division of the remainder, so the risk is, upon sale (assuming no movement in value or mortgage):

Gross value £200,000

Mortgage paid £151,000

Balance for division £49,000

Split 57.75/42.25 £28,297/£20,702

Which is not what was intended. Add in thoughts about how any movement in property value and mortgage reductions are allocated and it becomes potentially very complicated!