Loan to adult child

[phoenix53]

Hi. I've been re-reading some of the posts on the above subject and would like to ask the following:

My adult son has started to talk about saving a deposit for a house and has been saving for the past year or so. I haven't asked how much he has saved.

This was an area where I thought I would like to help out when the time came. I'm wondering on the timing. Do I offer a sum now so he knows what I will give him or do I wait until he sees a house that he would like to buy?

From reading the posts it appears that it is best to offer a loan with demand deposit interest rates where interest will be covered by the 3000 gift Exemption.

Thank you

 

[Philip S]

Hi Op,

Are you gifting a fixed amount or variable amount ie is it 100k regardless or if he sees the right house could the amount increase? either way their is no issue discussing it now so they can build into their plan. Also be aware if they are getting a mortgage as well, the bank will include payment terms for this loan into calculating how much of a mortgage he can get.

 

[phoenix53]

Hi Op,

Are you gifting a fixed amount or variable amount ie is it 100k regardless or if he sees the right house could the amount increase? either way their is no issue discussing it now so they can build into their plan. Also be aware if they are getting a mortgage as well, the bank will include payment terms for this loan into calculating how much of a mortgage he can get.

Hi. Thanks for the reply. Oh for it to be 100k. More like 20 or 30 at a push. Could you explain more about what the bank will do? Will it work against them?

 

[LS400]

Here's what I would do,

Whilst €20/30k is not to be sniffed at, its not a huge amount in the purchasing power of buying a home.

Id not complicate it with banks, gift tax allowance etc, Id furnish it for him/them.

New house will soak up a lot of that, second hand home will need refurbishing to some degree.

I would though have a word with him in that he can factor that into his plans.

 

[phoenix53]

Here's what I would do,

Whilst €20/30k is not to be sniffed at, its not a huge amount in the purchasing power of buying a home.

Id not complicate it with banks, gift tax allowance etc, Id furnish it for him/them.

New house will soak up a lot of that, second hand home will need refurbishing to some degree.

I would though have a word with him in that he can factor that into his plans.

Thank you. There are others to be considered too as I always try to give the same to each of them.

In my mind I thought it would help towards the deposit that he will have to gather which I think is 10% of a purchase price.

Furnishings is an option I hadn’t considered until now.

I come from living with deck chairs, until you can afford better, days

 

[Philip S]

Hi. Thanks for the reply. Oh for it to be 100k. More like 20 or 30 at a push. Could you explain more about what the bank will do? Will it work against them?

I had to consider this when buying. The bank will look at the real or deemed repayments on the loan as part of the expenses so depending on income may reduce the mortgage that they can apply for.

 

[Des Pondent]

From reading the posts it appears that it is best to offer a loan with demand deposit interest rates where interest will be covered by the 3000 gift Exemption.

We gave cash gifts to our kids, had we loaned it to them the amount they could borrow would have been reduced and they needed the maximum mortgage they could get plus the gift to be able to buy as close as possible to what they wanted. In our day we had average jobs and had no problem buying what we wanted and where we wanted, that is not the case for buyers today.

Bear in mind if applicable it will reduce their inheritance threshold when the time comes, our thinking though was it would be far more beneficial to them now than have them struggle until they inherit it anyway sometime in the future.

Banks wanted forms witnessed by the solicitor confirming it was a gift and that we had no claim or interest in the property being bought, no problems there.

 

[misemoi]

You can give your child 3k a year without impacting thresholds. So in theory 3k this side of 2024, 3k in Jan. Make sure it is saved for the house! And then when he finds the one he likes, you can help him furnish it with some of the balance....it may roll on to 2026 so another 3k then. And his other parent can do the same so you might be able to give the whole lot over this year and early into 2026. None of this will impact on his loan application or affordability as long as you have a letter or the bank might have a template confirming it is a gift.

 

[T McGibney]

You can give your child 3k a year without impacting thresholds. So in theory 3k this side of 2024, 3k in Jan. Make sure it is saved for the house! And then when he finds the one he likes, you can help him furnish it with some of the balance....it may roll on to 2026 so another 3k then. And his other parent can do the same so you might be able to give the whole lot over this year and early into 2026. None of this will impact on his loan application or affordability as long as you have a letter or the bank might have a template confirming it is a gift.

As the OP is considering giving their son "20 or 30k at a push", dragging it all out for years to save marginally on a CAT threshold that they may never utilise sounds like overkill - particularly as their son is saving a deposit for a house.