Securing the Bank of Mum and Dad

With the average first-time buyer needing £16,000 to buy a property, many first-time buyers are turning to their parents for help with a deposit. If you are in a position to do so, then you need to be aware of the steps you, and your child, can take to protect their interests, and your money.


Loan or a Gift?

The first decision is whether to make a loan or a gift. If you decide a formal loan is best, should you register a charge against the property to secure the loan? Bear in mind that, if there is a mortgage, you would be the second charge holder, after the bank or building society.

If you are intending to charge interest on the loan you may incur a liability for income tax.

If the money is being given as a gift, some consideration must be given to inheritance tax liability althoughif you survive for 7 years after the gift is made it will probably incur no inheritance tax liability.

Joint Ownership

If your child intends to buy the home with a partner, or another person, it is important they are protected if the relationship breaks down in the future.

You should ensure the property is held as “tenants in common” unless you want the survivor of the two owners to automatically inherit it all.

To ensure that any sale proceeds are divided fairly you should ask a solicitor to prepare a declaration of trust for both owners to sign. It will set out the share that each co-owner will have in the property. This can be expressed in fixed shares, or as a percentage.

The trust can also include details about the circumstances in which the property can be sold – whether notice is required from one co-owner to the other, whether there is a period of time allowed for one co-owner to buy out the other, and other similar clauses.

Having a live-in partner in your house

If the house is in your son or daughter’s sole name, or even in your name, will any contributions to the mortgage payments or outgoings entitle the payer to an interest in the property (and a share in the proceeds if it is sold)? A simple agreement or trust can make sure there is no confusion.

Please feel free to get in touch with us for help dealing with Deeds of Trust, Co-Ownership, Legal Charges, Inheritance Tax and Will Drafting on 01530 266 000 or by email on, if you have any queries, or would like further information.