The Bank of Mum and Dad
Increasingly Parents are contributing towards their children’s deposit for their first house.
Sometimes Parents wanting to contribute to their deposit can find themselves arguing about repayments years later or worse still their money goes to their child’s partner if the couple split up.
Expert advice should always be sought to avoid a fall out.
There are options available to you:-
Decide at the outset if the money is a cash or gift. You should be aware that Mortgage Lenders do not like it if the deposit is a loan. If a gift the Parents will be expected to provide a written statement to this effect for the Lender.
If your child is purchasing the property with a partner you need to decide what will happen to your child’s share of the equity of the property if they split up. A Declaration of Trust can be drawn up by your Solicitors to reflect who owns what share in the property on the sale of the property. This Deed allows for the equity in the property to be split on whatever percentage they wish, for example, 70/30. Their individual shares can also be reflected in the Transfer Deed to them and they should hold the property as Tenants in Common.
A second charge could be put on the child’s property by the parent and they could state that when the property is sold a percentage of the equity of the property or an agreed sum would be paid back to them. Please be aware that Lenders may not agree to a second charge being created.
We would be pleased to advise on and draw up a Declaration of Trust. Please contact one of our Residential Conveyancing Lawyers for further information.
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