Parents should be careful when helping their children buy a home
Parents are being urged to consider all the legal implications before handing over large sums of money to help their children buy a home.
The Law Society says families could be torn apart if things go wrong.
The current economic climate means 100% mortgages are no longer readily available. Most banks and building societies won't lend unless the buyer can provide a large deposit – sometimes as high as 40%.
Such figures are beyond the reach of most first time buyers.
The Law Society says the strict mortgage regime means that an increasing number of young people are calling on the 'bank of mum and dad' to help them get on to the housing ladder.
However, problems can quickly emerge if there is no clear understanding of how and when a loan should be paid back.
The President of the Law Society, Robert Heslett, said: "If parents are helping their children, they should see a solicitor beforehand in order to draw up a loan agreement."
"It is very important that all parties involved are comfortable with the arrangement and that everyone knows where they stand with regards to paying back the money. While it's unlikely your children will run off with your savings, handing over a large amount with no legal structure in place is a minefield. It could tear families apart if things went wrong."
The Society stresses that parents should seek legal advice to protect their interests before handing over their life savings.
"A solicitor will also talk through all the options available, and provide alternatives, such as parents acting as loan guarantors or entering into a joint ownership agreement."
"Solicitors are trained experts and are highly experienced in navigating the maze of paper work and dealing with house purchases. Not only will a solicitor offer the best advice and service, they will help to avoid some unforeseen hazards that may occur down the line."
Please contact Stephen Flint of our Moving Home Department if you would like more information about helping your children on to the property ladder, or any aspect of buying and selling a home.
