1 in 6 First Time Buyers Get Financial Support From Parents - What You Need To Know
Recent surveys from Post Office Money have revealed that 1 in 6 first time buyers get some form of financial support from their parents in order to fund the purchase of their new home.
Although some major changes to the market have taken place within the past year to aid with first purchases (you can read up on these here), factors such as cost of living and rising house prices are still standing in people’s way to getting their dream home. As such, many parents are opting to help their children out and keeping finances within the family in a way to share the costs and give that extra push that is often needed to get a foot onto the property ladder.
We often see deposit monies consisting of parents’ money to help fund children’s’ first purchases. In fact, research into figures show that an average of £28,000 is either loaned or gifted to kids- roughly equating to a house of flat deposit (or at least part of one in the South East!). Although this sentiment is lovely, it is important to remember the legal consequences and requirements that come with this.
Up to 87% of those who get financial assistance from parents have no formal agreement in place, with only 16% consulting a solicitor about these agreements or implications. Two thirds of these parents gift the monies outright (as opposed to arranging a verbal or informal loan)- yet so many don’t get a deed of gift or associated letter to confirm this. If you are receiving gifted money from your parents, or if you are a parent who is gifting the money, it is important to know that we always ensure that the appropriate documentation is drawn up during the transaction.
A letter of intent/gift confirms that the funds are a gift, that the donor will not request any re-payments, and that they will not have any interest in the property. If you have a lender, they also often require this formality to be arranged. Without this, parents may be lumbered with consequences which can include being subject to Stamp Duty Tax. Whether a gift or a loan is being agreed, we strongly suggest that you speak to us about your circumstances so that we can advise you accordingly and provide clarity. If you would like to know more about gifted deposits, you can read here about exactly what we will require during the transaction.