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Bank of Mum & Dad

According to a recent report by insurer Legal and General,  there is a suggestion that parents are providing financial support equivalent of the 10th biggest mortgage lender to assist their family members getting onto the property market.

 

If you are considering helping a family member with the purchase of a property then you should consider the following questions:-

 

Do you intend the money to form a gift? 


This means that you do not wish for the money to be returned to you at any point in the future.  A gift of money that exceeds your annual gift allowance will need to be survived by you for seven years in order for it to pass out of your estate for inheritance tax purposes. 

 

Do you want the money back either by repayments or capital upon sale? 


This means that you are making a loan.  A loan can be documented by a Loan Agreement with terms agreed between the parties.  It can either be secured over the property or unsecured.  However, some mortgage companies may not find this acceptable and therefore it may affect your family members ability to obtain the full mortgage they require.  

 

Do you want to protect the money? 


Is your family member buying a house with a third party, someone unrelated?  You would need to carefully consider how you intend the benefit of the money you are providing to be held. Matters can become complicated in situations such as these, in trying to balance the interest of the mortgage company, your family member and your own intentions!

 

We would recommend that you take legal advice if you are considering benefitting a family member in this way, and here at Seldons we can provide the advice and expertise you need in a this regard. Why not take advantage of our 15 min free interviews? 

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