Legal advice from Chris Illingworth, an Associate Solicitor specialising in residential conveyancing based in our Frodsham office
Q: We want to help our daughter buy her first house with a financial contribution, what is the legal process?
A: Rising house prices and the need to find bigger deposits mean the prospect of being forced to rent for life is all too real for many young people.
It’s not a surprise therefore that the BBC recently reported that parents or the ‘bank of Mum and Dad’ are now the 10th biggest UK mortgage lender to help their children get on the first rung of the property ladder.
When helping out family members it may feel intuitively wrong to put financial matters on a legal footing, but failing to do this could turn out to be a very costly mistake in the future.
You should be clear from the start as to how you consider this contribution, and discuss with all parties involved as to whether this is it an investment, a loan or a gift and what you are expecting as a return in the future i.e. repayment, a share of the property or nothing.
You should also consider the future and what would happen if there is a change in yours or your children’s circumstances and how that may affect the situation i.e. marriage breakdown, death or redundancy.
It is worth noting that if you are gifting this financial contribution then it should be done with no expectation that it will ever be returned. Inheritance tax will not apply to the gift if you live more than 7 years from the time the gift was made.
Legal paperwork will be required for any of those options and it is important that you seek independent advice from a specialist solicitor to guide you in this process.