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Helping your child onto the property ladder

The Legal Side

Loan it, don’t gift it

70% of parents say their support for their child is a gift. But whilst gifting your child the cash they need may seem like the right thing to do, it could leave you (and them) unprotected. For example, if your child and their partner separated, you could both lose the money. By loaning instead of gifting, your money is protected. And you can always make a gift of that loan later, when you feel more relaxed about the situation or their relationship matures.

Tell the mortgage lender you’re involved

If you’re contributing to the property purchase, make sure your child tells their mortgage lender from the start as any third party involvement could impact the mortgage offer later on.

There is an obligation on the legal advisor for the child to advise the mortgage lender on the source of the funds and so it is important the lender is advised from the outset of the proposals.  This will ensure the lender is in agreement to the loan from the parents.

Cash emergency

Strongly consider the possibility that at some point you may need the money back. Ensure your money is protected by a Declaration of Trust which states that the house is to be sold if you need the cash back and agree fair terms so you and your child are both protected.

Protect your other children

If you’ve borrowed the money to fund your child’s purchase, or simply used savings, this could affect what is passed onto your other children when you die. Ensure you have a Declaration of Trust which is clear about how the funds should be settled between all parties in the event of your death.

Register a restriction at the Land Registry

If you want to guarantee a return of your investment, you need to do this to ensure your child cannot sell the property without your consent. Whilst this is unlikely to happen, it is  always a good idea to be protected.

Remember, it’s taxable

If you see your contribution as an investment which will give you a return, remember that even if your name isn’t on the property deeds, any profit you make may be taxable as income tax or capital gains tax.

The Life side

Talk it out

Be really clear with your child exactly how much you are prepared to contribute and don’t let yourself get rail-roaded into paying more than you can afford, as this could cause you both more problems in the long term.

Share your experiences

If you’ve already been through the process of buying a property, you’ll know there are often little hiccups along the way. Use your experience to help prepare your child for this so they can calmly navigate the conveyancing process.

Respect your child’s boundaries

Whilst your contribution to your child’s property will no doubt be a huge help to them, remember it is their purchase and they’ll want to have control over any decisions made.

Keep smiling

Buying a property is a big responsibility and can often lead to people feeling overwhelmed and stressed. If your child isn’t their usual sunny self with you at this time, don’t take it personally. Keep smiling and your positivity will help get them through.