How best to help my Son and wife in purchasing.

LastHurrahx

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My son and his wife have returned after a number of years abroad.

They are good steady savers and have about enough for a deposit on a house. Both have just secured (good) jobs - but haven't even started yet. So they will have to wait until they are made permanent before applying for a mortgage. Which means at a minimum of another six months.

Most likely, it will be the end of year before they would be in a position to bid on a house. Classically, they are afraid that houses that are now in their potential range, will be out of their range by the time they can purchase.

My wife and I are willing to help - but not sure how best to do that.

We are not overly flush - but we could help.

One thought is that if we loaned them an amount equivalent to the mortgage they could move straight away to get the house that is now in their range. We are thinking in terms of giving them this loan for two years - and that they would continue to save, as heretofore, and build up a cushion for themselves and then apply for a mortgage in the normal way in two years.

I should say that both are extremely organised and disciplined and rock steady.

We also have a daughter - who is single - and we would, after the two years hope to help her in a similar fashion. We don't have this money to throw away but can do without it for the next number of years.

Should we make the loan to our son only??
Should he buy the house in his sole name - until such time as they apply for the mortgage??
Should we actually buy the house jointly with them on a pro rata basis?

Would love to hear of any other suggestions about how to help them - and how to safeguard ourselves.

Many thanks.
 
Should he buy the house in his sole name - until such time as they apply for the mortgage??


Many thanks.

Personally I think that could be a recipe for disaster.

He would be buying a house with your money. Who is to say that he would apply for a mortgage if he already had a house in his own name. I know... I know...but things do not always go according to plan.
 
You should buy the house in your own name and rent it to him.

When he is in a position to raise a mortgage, he can buy it from you.

It may be difficult if you give him the money now, for him to raise a mortgage on the property. Banks are not big into refinancing.

If you sell it to him for €100k when it has risen in value to €130k, you would be liable to Capital Gains Tax on the increase.

You probably should enter into a contract with him now which obliges him to buy the house from you at today's price in two years' time.

I think Revenue should be satisfied with this and not require CGT. But maybe take advice from a tax advisor on this.
 
You should buy the house in your own name and rent it to him.

When he is in a position to raise a mortgage, he can buy it from you.

It may be difficult if you give him the money now, for him to raise a mortgage on the property. Banks are not big into refinancing.

If you sell it to him for €100k when it has risen in value to €130k, you would be liable to Capital Gains Tax on the increase.

You probably should enter into a contract with him now which obliges him to buy the house from you at today's price in two years' time.

I think Revenue should be satisfied with this and not require CGT. But maybe take advice from a tax advisor on this.


Sorry Brendan, this is crazy "advice"
 
Here's my advice.

Let your son figure it out for himself and dont get involved financiallyat this stage. Its not as if they have been trying to buy a house for years. They've just moved back and both are starting new jobs. There is a chance that one or both of these jobs will not work out as planned and then you could be stuck with a house that neither of you wants and remember also that house prices go up as well as down.

You're their father / mother and not their bank. Offer them plenty of support in terms of sunday lunch but keep your hands in your pockets for now..

I think it would be better for them to rent, settle into their jobs for a year and then when they are ready, let them apply to the bank for a mortgage on their own merit.
 
Sorry Brendan, this is crazy "advice"

Hi Tommy

To be honest, I think it's a bit unfair to deem something as "crazy" without specifying why.

I have no problem at all with being corrected where something is factually wrong.

Nor have I any problem with you offering a better solution. Even if you can't offer a better solution, I have no problem with you showing what is wrong with my advice.
 
Fair enough Brendan, sorry not much time to spare this morning.

The "contract" ruse to avoid CGT won't work. If there is significant price acceleration in the meantime, there will be a significant CGT liability.

The OP would face significant income tax bills on the rent received, given the limited nature of deductions available

"When he is in a position to raise a mortgage, he can buy it from you." - common advice in Celtic Tiger times, and we know what happened there.
 
The "contract" ruse to avoid CGT won't work. If there is significant price acceleration in the meantime, there will be a significant CGT liability.

Fair enough which is why I did say
"I think Revenue should be satisfied with this and not require CGT. But maybe take advice from a tax advisor on this. "

I think it's good practice to suggest ideas to be investigated and then discard them if they don't work.

The OP would face significant income tax bills on the rent received, given the limited nature of deductions available

He would not have to charge rent. If he is borrowing to buy, he could charge rent up to 75% of the interest paid.

"When he is in a position to raise a mortgage, he can buy it from you." - common advice in Celtic Tiger times, and we know what happened there.
I have never heard anyone giving that advice. It's only really been a runner since stamp duty was reduced to 1%.

The biggest "problem" with my scheme is that the father would face a CGT bill.

If there is significant price acceleration in the meantime, there will be a significant CGT liability

But if he does not buy now, and there is a significant price acceleration, the son may not be able to afford a house.

I don't like paying CGT, but I prefer it to counting my losses.
 
If prices drop over the next two years will your son be willing to pay today's price for the property? Two years is not a long time to wait imo.
 
Could I suggest they rent a house in the area where they hope to purchase. It takes a while to know and grow into an area.

Parents please do not get involved in their house purchase. They are so lucky to be coming back home to 2 good jobs, so why would they need your help. I realise this would enable them to become home owners sooner but things change and they could move to other jobs at the other end of the country.

Very few of us have followed the life plan that we started out with. We thought we bought the forever house many years ago. We've had 4 moves since.
 
Personally I think that could be a recipe for disaster.

Let your son figure it out for himself and dont get involved financiallyat this stage. .

Parents please do not get involved in their house purchase. .

TMc.Gibney said:
"When he is in a position to raise a mortgage, he can buy it from you." - common advice in Celtic Tiger times, and we know what happened there.

I think it would be best to leave the young couple work things out for themselves,

I have to say I fundamentally disagree with the general view here that Last Hurrah should not help his son.


His son and DIL would normally be able to get a mortgage for themselves but for the fact that they have just returned to Ireland and so are still on probation. I just can't see anything wrong with the father helping them over this temporary and artificial barrier.

  • It's a temporary loan
  • Although not flush, the parents seem to have the money
  • The children are "extremely organised, disciplined and rock steady"
  • They are steady savers and have the deposit for a house
  • They both have good jobs
This is not a father guaranteeing a son to borrow 10 times his salary.

This is not a father lending money to his son in the hope that the son will eventually be able to pay the mortgage

This is not a father remortgaging his own home to give money to a prodigal son who wants to speculate in the property market

I think it's important to distinguish between giving temporary help to a son who has a temporary and somewhat artificial barrier to buying a home and encouraging speculative behaviour in a wayward son.

On many occasions, it is wrong to help the children, but, in my view, this is not one of them.
 
If you are happy to invest in a buy to let then fire away but otherwise I think you're playing with fire.

Please remember that the value of property can go down as well as up.



Will your son and more so his wife still be happy to pay you today's value if there is a drop in property values, if the location no longer suits them, if they feel they made a mistake and would prefer a different house in a different area etc.

There is a reason banks want people to have permanent contracts. One can be dependable, hard working etc but you may still not be considered a proper fit or business may not be good enough to keep you on.

If my in laws did this for me whilst grateful I wouldnt be 100% happy, id feel as if they have more of a say in my life then I might choose and I would feel a bit of an obligation towards them in future beyond what would be normally expected and what I would feel comfortable with.
 
The main issue here for the OP is his ultimate need for these funds! i.e. Are they spare/rainy day funds that will not be needed in the short/medium term? If so then by all means use them to help out the family. If the funds are being lent on the basis that a return within the next couple of years will be required, then best avoid the loan idea altogether. there is nothing wrong in helping out a son or daughter to get on the property ladder. However this should only be done with spare money that is not and will not be essential to the needs/living expenses of the parents.
 
If the parent has the funds to cover the mortgage amount (as the OP has suggested here) can the OP not go as guarantor on a mortgage application by the son and wife? From reading other threads it sounds like this would meet the criteria required by banks (for example the post by Liam in post #12 in this thread) so is that an option here?
 
No real bank appetite for approval of mortgages based on the creditworthiness of a guarantor.
 
Plenty of good debate above which is healthy!

My sense is that it is great that the parents are being supportive, suggest they provide plenty of emotional and practical help, etc, but steer clear of too much involvement in the house. Give the couple time to find their feet back here, decide what they want and take it from there.

While admirable that the parents are potentially thinking of financing a house, even if up front it is considered a temporary arrangement, actual facts and circumstances can change quickly. Noble objectives now may not turn out that way in time.

While settling in, the couple can continue their good habit of saving and if after a period the couple still want to buy perhaps then is the time to offer some assistance, even part financial. Let the couple source their own mortgage and perhaps give a small lump sum to help with the deposit.

While not commenting on house prices, I would ask the question - are house prices likely to rocket such that over a short period this house is beyond them?

Decide with haste, repent in leisure also comes to mind.

And finally, parents, as you approach retirement perhaps it is wiser to hold onto your own money or most of it anyway, without complications, admirable and all that the intentions appear now.
 
Many thanks for all the reponses.
Really helpful to get different views.

I take on board (and appreciate) the cautionary notes.

In one of his posts, Brendan pointed to the slightly artificial situation in which they find themselves - and I think that is the nub of the matter. Both of them garnered specific experience when they were away which led directly, in both cases, to getting their current jobs.

But, conversely, their time abroad is now an effective barrier to their moving on the house situation.

Right now I am tossing around two ideas.

1. We guarantee their mortgage (for a two year period) supported by a back to back deposit for the amount of the mortgage (or maybe that amount + 10%).

Not sure if that would be a runner with the mortgage provider. Both of them have jobs where there are progressive prospects. Also, both are pretty marketable. Were it not for the fact that they are pretty much starting off afresh again, they tick all the boxes.

2. We loan them the amount of the mortgage, under a Loan Agreement for two years. Is it possible for an individual(s) to get a charge on a property in a situation such as this??? Also, in this scenario, I would get them to take out Employment Protection Insurance.

Under option 2, I would envisage calling it a Bridging Loan, which would be interest free. This latter detail would enable them to save for a further two years to help them build up a bit of a cushion.

I do take the point that was made about being beholden to your in-laws. But the way I envisage it is that we are not actually going to GIVE them any handout - we are merely helping them along the way. Also, it would be done on the basis that they need to organise their mortgage before the elapse of two years - because we need it back to support our daughter in some similar fashion.
It is a strictly understood rubric in this family that both son and daughter are treated precisely the same.

Would welcome any further thoughts on these two potential options (or indeed, any others).
 
There is no technical or legal problem in your giving them a loan and taking the house as security.

The problem would be after two years, would a lender give them a mortgage to pay you your loan. I think it would be easier for them to get a loan to buy a house than to get a loan to replace a loan.

Brendan
 
What do the couple themselves want to do? After living abroad for some time, it would be wise to rent in the area they wish to buy before commiting to buying.
 
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