3rd October 2019
Bank of Mum and Dad need Legal Advice
Bank of Mum and Dad
Research released this week suggests that around 61% of first time buyers this year bought their first homes with parental help. According to Legal & General, the ‘Bank of Mum and Dad’ is worth around £6.3bn this year. Parents are handing over an average of £24,100 to aid their children purchase a home. That’s up by more than £6,000 from last year.
With so many baby boomer parents sitting on significant housing equity, releasing cash to help their children buy a house seems an obvious thing to do. Especially when the options are seeing them paying more than the cost of a mortgage in rent payments. Worse still they might not ever leave home!
A gift is still the most common way for parents to help their child buy a home. However, there have been more than a few cases where the family did not realise that the funds they were handing over were not a loan. They were expecting the money to be paid back at some point. This is how families fall out!
Aligning parental expectations with those of their children can be challenging with these cases. It is highly recommended that parents take independent legal advice – especially when they are gifting to a child who is purchasing with a spouse or a partner. Parents must ensure that they are fully aware of the ramifications should a child fall behind with mortgage repayments or indeed have a massive fall out. Either with themselves or the child splitting from his or her partner. Hence mortgages where parents lodge their savings with a Lender rather than gifting a deposit are slowly becoming more popular.
Not Just for Parents
We hjghly recommend all first-time buyers who are purchasing with the help of family should be pushed to get legal advice, alongside their parents. Independent advice meaning different solicitors. Relationships can and do break down over money and the correct advice at the outset helps to avoid long lasting fall outs.