Giving son full price. Payback when he gets mortgage

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cronley

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My son is keen to buy house. Has good permanent job. Applied for mortgage with BOI. They said they will give him mortgage after he prooves saving ability for at least 6 months, which he will have no problem doing.
I am considering giving him the full price to buy the house. He is to pay me back when he gets the mortgage.
Any views on what issues I should consider before doing this. I have no worries about my son not paying me. Should the house be bought in my name or sons name - presume we save legal fees putting it in his name. Will BOI give him mortgage if house is in his name. Any other views appreciated.
 
More than likely, they'll give him the mortgage but will want you to sign an unsolicited personal guarantee. If you're doing CAT planning, the best thing you could do is to ask your accountant as the threshold has been vastly reduced.
 
Thanks Mercman
I don't see how Gift Tax could be an issue, when I am only giving him a short term loan.
 
Does he need to buy straight away!

I think your concern should be what happens if you buy the house in his name and there is an issue before he draws down his loan. Seems odd to me that the bank willing to offer him a long in 6 months after proving he can save.
Having said that nothing surprises me these days from our friends in the banks. ;-)
 
cronley said:
My son is keen to buy house. Has good permanent job. Applied for mortgage with BOI. They said they will give him mortgage after he prooves saving ability for at least 6 months, which he will have no problem doing.
I am considering giving him the full price to buy the house. He is to pay me back when he gets the mortgage.
Any views on what issues I should consider before doing this. I have no worries about my son not paying me. Should the house be bought in my name or sons name - presume we save legal fees putting it in his name. Will BOI give him mortgage if house is in his name. Any other views appreciated.
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You should take out some sort of contract with your son to safe guard yourself as anything could happen with the mortgage and you could lose out, why not speak to a solicitor before you give over the purchase price of the property to your son.
 
kev said:
you should take out some sort of contract with your son to safe guard yourself as anything could happen with the mortgage and you could lose out, why not speak to a solicitor before you give over the purchase price of the property to your son.
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+100
 
cronley said:
My son is keen to buy house. Has good permanent job. Applied for mortgage with BOI. They said they will give him mortgage after he prooves saving ability for at least 6 months, which he will have no problem doing.
I am considering giving him the full price to buy the house. He is to pay me back when he gets the mortgage.
Any views on what issues I should consider before doing this. I have no worries about my son not paying me. Should the house be bought in my name or sons name - presume we save legal fees putting it in his name. Will BOI give him mortgage if house is in his name. Any other views appreciated.
Click to expand...

I don't think this is a good idea. If you buy the house and your son pays you back the mortgage, then he won't really own the house, so it's unlikely to meet his goals. Have you discussed this with him?

The alternative is selling it to him in a year or two when/if he gets a mortgage. Aside from the risks of this, you'd incur double transaction costs and taxes/stamp duty.
 
cronley - what if you gave your son the money & he bought the house - but when he went for his mortgage the value had dropped and/or he did not fulfill the bank criteria for the whole mortgage? Who would bear the shortfall, you or your son?

Anything from the bank to show they will definately give the full mortgage amount in 6 months? unlikely

I think its a bad idea - let him do this himself, in his own time!
 
This is very risky – how come he hasn’t got a 6 month saving record? Presumably if he is permanent he has been working for over 6 months. Has he not been thinking about buying for a while?
You should be very careful about tax and legal requirements. Protect yourself.

As mentioned previously what if prices go down after the budget cutbacks and repossessions.
 
Banks are prioritising first time buyers. I am not sure that they will give him a mortgage in 6 months to redeem your mortgage.

If you have this cash long-term, why not cut out the middle man and give him the mortgage directly? At present, you probably have your money on deposit in a bank at 2% which lends it back out to him at 4.5%.

Get a solicitor to do a legal document, so he has to repay the loan if he wants to sell the house. Or you can repossess if he doesn't make the payments.

You could be a lot more flexible than the bank

  • He could take payment breaks when he needed them
  • He could draw down more money if needed
  • You could make it non-recourse, if you wanted to
  • You could give him a fixed-rate loan

You would be taxed on the interest received at your marginal rate instead of at the lower Dirt rates, but even still, you would be getting a higher net return.
 
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