I spoke on Radio Wales this morning about the 'Bank of Mum and Dad' apparently now being one of the biggest 'lenders' in the UK, with the average parental contribution to their children's first homes being £24,100.
If you are parents hoping to help your children onto the property ladder, think it through carefully. These are some things to consider before you all sign up:-
- Do you need the money back? Is this a 10-15 year plan so that the money is to come back to you when your children sell up and move on?
- What happens if one of you dies? Does the other parent need it back or does this write off the debt?
- Is the money a straight forward gift or is it an interest free loan?
- What if your child meets someone and they move into the house? Can your child re-mortgage and add parties? Do you want to re-evaluate the gift/loan at that point?
- What if your child goes through a divorce/separation?
If nothing is written down, the money is as good as a gift - even if everyone really knows it wasn't.
People hope that they can avoid legal fees by hoping everyone will honour agreements, but life can be funny. So if you are agreeing a mortgage through the Bank of Mum and Dad, spend some money and time sorting out the terms so that you can save an awful lot of money in unnecessary legal fees if things go awry in future.
Collectively parents have given £6.3bn, high enough to rank the bank of mum and dad 10th if it was a mortgage lender.