House prices in the UK are expensive.
If you know someone who can’t afford a house, you might want to help them.
So, can you buy a house for someone else in the UK?
Read on to find out.
Can you buy a house for someone else?
Yes, you can buy a house for someone else in the United Kingdom.
There are different ways to do this, each with its own steps and suitable to particular circumstances.
1. Sign an offer to purchase
When you buy a house for someone else, an offer to purchase must be signed.
This document lists the intended owner as the purchaser. Speak to a solicitor for guidance with drafting this document.
2. Use a declaration of trust
A declaration of trust is more useful when one person is going to hold the property for someone else.
The holder’s name will go on the Title Deeds. And the contract will state when it will be transferred to the intended recipient.
This may be upon a specific date or event.
3. Put the house in a trust
Putting a house in a trust is the most common method for buying someone under 18 a house.
It can be set up so the child receives ownership of the house once they turn 18. Parents often use this method for children.
4. Take out a joint mortgage
You can take out a joint mortgage with the person you intend to buy the property for.
One joint owner can then sell their share of the property to the other. This puts it in one person’s name.
Remember that the lender won’t necessarily allow just one of you to remain on the mortgage alone.
They’ll only allow it if you give proof that meeting monthly repayments is likely.
5. Gift or loan the money
Giving a house as a gift is an indirect way of buying a house for someone else.
You can give them the money or loan it to them for them to use to complete the transaction.
You’ll need to state the reason for gifting it to them and show the source of your funds.
Make sure legal steps are taken to make this a legitimate transaction.
Are there exceptions when buying a house for someone else?
A child under 18 is not allowed to take legal title to property in the UK.
This means that you (as a parent) must consider buying a property in a trust.
If you buy a house for someone who is mentally incapacitated, you should make sure to follow the correct procedure.
This often involves liaising with the power of attorney. You must also ensure their legal title gives them the right to handle the process on behalf of the recipient.
Reasons to buy a house for someone else
Helping a child get onto the property ladder
This is probably the most common scenario. Parents are keen to give their children a great start in life.
And helping them onto the property ladder is an excellent way of doing it.
Buying them a house ensures they don’t go into rented accommodation. It thus helps a child to build up equity.
Caring for an older person
If you’ve got an elderly relative who needs care, it can be challenging if they live far away.
Buying a house that’s closer to you allows you to do this. This is especially helpful if they’ve got dementia and often get locked out of their home.
They’ve fallen on hard times
You may want to put up a family member who’s homeless, or has recently been made unemployed.
Buying a house for them ensures that this accommodation is ‘permanent’.
Investment
This might involve certain conditions that you’ll get first refusal when they sell.
The house could stay in the family and thus benefit people you love and care about.
This is usually considered if you’ve got more money than you need and thus want to invest it well.
Properties consistently rise in value and lots of experts recommend this route.
Investing in this way while looking after someone you love is convenient.
Drawbacks of buying a house for someone else
You should put careful thought into buying a house for someone else. This includes speaking to legal experts for guidance and a tax adviser.
This ensures that you know all the implications and follow the correct procedures.
Your credit score can be impacted
When you buy a house jointly with someone else, your credit score can be impacted. This may have an effect when you take out another mortgage.
It’s especially damaging if they fail to meet their payment obligations, when you’ve both agreed they’ll pay them.
This is because it will still reflect badly on you, and thus your credit score.
Conveyancing can take a long time
It’s complicated to buy a house for someone else.
This means conveyancing often takes longer than a ‘regular’ house transaction involving only one person.
Make sure you factor this into your timeline. And speak to a solicitor for guidance on how long it will likely take.
Legal fees are often expensive
Many solicitors charge on an hourly basis. A longer conveyancing process thus translates into higher costs.
You and the person you’re buying for may choose to split these costs. But if not, you’ll have to shoulder a larger fee yourself.
You may also find that fewer low-level conveyancers have experience in this process. This means that the ones who are qualified charge more.
The purchaser may not automatically have ownership rights
If you want it to be otherwise, this must be established in a written agreement with the owner.
But in many cases, without a contract stating otherwise, you may not have ownership rights even when you purchase it.
