Bank of Mum and Dad Busier than Ever after Covid-19
For people looking to buy their first home in 2020, the Coronavirus pandemic might have come at the worst time, but luckily the Bank of Mum and Dad is still very much open for business in the UK.
A survey from retirement company Hodge found that there’s been an increase in parents and grandparents gifting money to their children following the Covid 19 outbreak. A third of those surveyed said the pandemic has made giving money to their children even more important, which is a big increase from just 23% of parents who were willing to gift money before Coronavirus.
With the generosity of their parents, first time buyers won’t have to delay moving into their new home. And as we’re offering £100 cashback and a Free Online Will when you exchange and complete on your property within 3 months, we know you won’t want to put your move off any longer. Ask one of our Conveyancing experts for more details on our great offers.
For initial advice get in touch with our Conveyancing Solicitors.
Helping your child buy their first home can be an exciting prospect, but it’s important to think about the practical side of things too. If you want to help your child buy a home you’ll want to protect your gift, and you’ll need to provide some additional information.
Below we explain some things that you should consider and how to protect your money if things go wrong, for example if your child needs to sell their home for any reason.
Giving your Child Money for a House
Hodge’s survey found that 40% of children expected to pay back the money to their parents, but that only 26% of parents expected the money to be paid back. It’s important that you speak to your son or daughter about the money you’re giving them, not only so you both know where you stand but also so your Conveyancing Solicitor can help protect your contribution.
If you’re giving your child money towards buying a home then your Conveyancing Solicitor will request ‘source of funds’ information from you. This will include:
- A declaration that you are gifting the money
- A copy of some form of ID, such as your passport
- Your most recent bank statement to show you have the sufficient
- A ‘source of wealth’ to show where the money came from initially
This process is relatively quick and simple, and we can advise you on the documents you can use so that you know what to expect.
How to Protect your Share
It’s best to protect your share of the deposit in case things go wrong and your child’s relationship or something happens to them.
Declaration of Trust
If your child and their partner split up and sell the property you could protect your share of the deposit with a Declaration of Trust.
A Declaration of Trust (sometimes called a Deed of Trust) is a legal document that will include how much money each owner of the property has put into it, and how much they’ll get back if the property is sold.
If the property is sold, the funds will be paid back after payment of the mortgage, estate agents fees and any other agreed fees. A Declaration of Trust can make sure that you get back what you put in, so if your child splits up with their partner, the partner won’t get a percentage of your contribution.
The funds from the Declaration of Trust will go to your child and they can pay your share back to you from there.
Tenants in Common
If your child and their partner contribute different amounts towards the property, it might be a good idea for them to own it as Tenants in Common. As Tenants in Common your child and anyone else they live with can each own a separate share in the property.
For example, your child could own 70% and their partner could own 30%. And if you have a Declaration of Trust in place, the ownership will always be as Tenants in Common. This means if your child and their partner sell their home then they can each get back what they put in.
When you own a property as Joint Tenants, if one tenant passes away then the other inherits their share. But owning the property as Tenants in Common means that if the worst was to happen to your child, their share of the property will be inherited by whoever they choose. This could be you, as parents, or their children if they have any.
The Bank of Mum and Dad is one of the UK’s largest lenders, and while it’s an exciting time for you and your child it’s also important to prepare in case things go wrong.
Our Conveyancing Solicitors have helped many parents to protect their contributions to their child’s first home. Get in touch for legal advice on getting a Declaration of Trust and owning a property as Tenants in Common.
Simpson Millar Solicitors are a national law firm with over 500 staff and offices in Billingham, Bristol, Cardiff, Catterick, Lancaster, Leeds, Liverpool, London and Manchester.