Rising house prices and tighter borrowing requirements have led to 1st time buyers borrowing more from their nearest and dearest - The Bank of Mum and Dad. Research shows that 27% of people over 55 have given support to their child or someone else to help them buy their own house. This £5 billion a year puts Mum and Dad equivalent to the UK's 10th largest mortgage lender. However such payments are often not commercial. The report said that of such lending 15% of these people are not comfortably off themselves.
Also what happens if the monies are given to a child and their partner and they then separate. The Family Courts in England and Wales often witness when such arrangements turn ugly.
In divorces where the housing need of any children under 18 is of first importance the origins of who gave such monies can often be of less importance to the courts.
If, as part of the Bank of Mum and Dad, you are asked/would like to make a contribution to your child's house and that of his/her partner then here are the ways to protect your asset:
1. Ensure that your loan is recorded in the title deeds and shows up on any office copy entry at the Land Registry
2. Record any terms of the agreement in an accompanying mortgage deed and a Declaration of Trust (drawn up to record the intentions of all parties involved - i.e. the length of the agreement /whether any interest will be paid)
3. Pay the monies at the same time as your child enters into a Pre Marital/Cohabitation Agreement with his partner so that such monies are protected as much as possible if they later separate
The Bank of Mum & Dad rivals Britain’s top lenders