Buying with help from "The Bank of Mum and Dad"

Getting on the property ladder can be difficult for young people, with more and more are relying help from parents or other family members when purchasing their first home.

But there are a number of things to consider to avoid problems in the future.

  • Is the money a loan or a gift? If it is a loan, are instalments are to repaid periodically, or when the property is sold? Is interest payable, or will the parents benefit from any increase in value of the property?
  • If the parent’s share is a gift, then consider the tax implications of making a gift – speak to your accountant and estate planning solicitor.

  • Decide how the property is to be held. Will the child be the sole legal owner on the title, or will they hold the property as joint owners with their parents? If so, will they be joint tenants or tenants in common?

  • Is the mortgage provider happy with the arrangements?

  • Matters could be further complicated if the child is buying with a spouse or partner who is not related to the parent lending the money. Everybody’s rights and obligations need to be clarified.

  • Parents might also want to consider imposing restrictions on the use or maintenance of the property to prevent any decrease in its value.

  • They may also want some control when the property is to be sold if they are due to be repaid from the proceeds of sale.

A document known as a Declaration of Trust should be used to record what is agreed and protect the parties’ positions. Everybody involved should also make a will which reflects what has been agreed.

These arrangements work well in most cases, but it is important to ensure that you work out everything in advance and get the correct documentation in place.

Our team of expert property lawyers will ensure you get everything right.

Published 19 June 2019

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