How can I get my child on to the ladder?
By Jo Eccles
Q: I’m thinking of giving my grown up child financial help to get onto the property ladder. Based on your experience, what do you suggest?
A: We act for many parents wanting to help their children. For grown up children, some parents will buy the property in cash and gift it to them. We worked with one father who bought four identical off plan properties for each of his children as he didn’t want any arguments between them – lucky them! On the other hand, parents might pay for the property in cash to ensure a quick purchase and then, after completion, the grown up child will obtain a mortgage on the property so some responsibility is instilled in them and they have to cover the outgoings.
If you don’t have the means – or the inclination – to buy a property outright for your child then there are other things you can do. For example, you could gift some money to increase the size of their cash deposit as this may help her secure a lower mortgage interest rate, thus reducing his or her monthly mortgage payments. Another option would be to offer to be a guarantor for their mortgage, which might open up property options which they wouldn’t otherwise be able to consider. Speak to your bank or a good mortgage broker to find out exactly what options are available to you.
Some of the parents we work with are concerned about protecting the property against a spouse; for example, if your son or daughter gets married and it doesn’t work out. There are various tax structures you can buy the property in to help with this, so speak to a tax advisor if this is a route you’re considering. Do note however that setting up trusts and so on can be expensive at the outset and, additionally, there will be annual costs for the actual running of the trust. As one of our clients once said, if his son marries badly and squanders the property, it’s his tough luck and he’s not getting any more handouts.
If you are loaning your child the money, instead of gifting it to them, then you’ll need to discuss time scales and whether you’d like interest paid. Speak to a solicitor for advice on how to structure an agreement; the clearer you can be about the terms of the loan, the better, especially as you don’t want any resentment or miscommunications to arise.
If you have a question you’d like Jo to answer please email email@example.com or tweet her @joeccles.