Families and Financial Help for First Time Buyers – Which is the Best Way?
With the cost of living on the rise, many parents and grandparents find themselves assisting younger family members with property purchases. There are various ways in which assistance may be given and it can often be difficult for families to decide which route is best for their particular circumstances. Each family is different but some of the considerations that may influence the way in which you proceed may include:- ensuring that each of your children are treated in the same manner, if your son/daughter is purchasing with their partner/spouse and tax implications.
To Loan or not to Loan?
A formal loan agreement is often an option considered by families in order to help younger members who may have issues in obtaining the mortgage that they need to purchase a property.
This has the advantage of avoiding any implication of ‘unfair treatment’ between siblings. We can prepare an agreement with terms suitable for your specific circumstances, including repayment, insurance and maintenance obligations. In situations where it is appropriate to do so the loan may be further protected by registering a secured legal charge against the property in your favour at the Land Registry, together with a restriction preventing any dealings of the property without your consent.
A possible disadvantage is that you may not feel that you can enforce the loan terms if your child does not uphold the spirit of the loan agreement.
A share in ownership?
Another option would be for parents to obtain an interest in the property itself. This would result in control over any future sale of the property and may be avaluable investment should property prices increase in that particular area.
We can document shared interests in a property and set out each person’s respective share of any future ‘equity’ (increase in value) in the property.
It is however, important to understand that an interest in a property other than your own home is likely to result in capital gains tax and higher stamp duty land tax implications and you should obtain financial advice in this respect.
An Outright Gift?
Some families are fortunate enough to be able to provide their children with the gift of a deposit towards their purchase.
If your children are purchasing a property with their partner and they are unmarried we would strongly advise that they consider entering into both a declaration of trust and a Cohabitation Agreement in which monies contributed by one side of the family may be accounted for and protected by mutual agreement. This can avoid conflict in the potential event of your child separating from their partner. If you child is married or intends to marry, any gift made by you could be classed as a matrimonial asset. In these circumstances a Pre or Post-nuptial Agreement should be considered as a means of protecting your contribution towards the matrimonial home.
Many families are confused by their options but, here at Arnold Greenwood, we have a team of solicitors who are experienced in these matters. No matter how unusual you think your family circumstances are, our specialists will guide you through your options in plain English and support you in making the right decision for your family. To find out more, please contact us today.
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01539 720049, or complete your details in the form below.