It is becoming increasingly common to gift a child or close family member funds towards their deposit on a property purchase. But what happens when there is another party involved, for example, the spouse or partner of your child?
In the event of a later split, do you really want to see your child’s ex-partner going off into the sunset with your hard-earned money?
Did you know you can easily protect your cash?
How to protect your deposit gift via a second charge
When your child buys their property, it is possible for you to have a charge placed against the property. This ensures that, in the event of the sale of the property you have control of your gifted funds. This is a simple legal exercise that protects your money and your relationship with your child.
There is a problem, however.
When gifting a deposit towards a property purchase, the mortgage lender will ask you to confirm that the funds are a gift, you will not be living in the property, nor have any interest in the property.
This flies in the face of your protecting your gift legally.
There are mortgage lenders that will allow you as the gift donor to place a second charge on the property to protect your gifted funds.
Find out more by calling our expert mortgage broker team now.
Tony and Margaret decide to gift £50,000 to their daughter Emma and her partner Ben to purchase their first home together. Three years on Emma discovers that Ben has become rather close to their neighbour Denise, and Emma and Ben’s relationship has fallen apart.
The property must now be sold and Tony and Margaret get to witness Ben setting up his new home with Denise, helped greatly by £25,000 of their money.
A better way
Had Tony and Margaret taken a second charge on Emma and Ben’s home they would be able to ensure that they recouped their full £50,000 before Ben took a share of the proceeds. They could then gift the £50,000 back to Emma to buy her new home in her name only.
Raj and Sonia gifted £100,000 to their son Praful to buy his home. Praful later set up a business against his parents’ advice which has now incurred considerable debt. The business debtors are seeking to recoup their money from the value of Praful’s home.
A better way
Raj and Sonia have a second charge on Praful’s property which ensures that their £100,000 is safe from their Son’s creditors.
The above are examples only and should not be considered legal advice. Always obtain qualified legal advice when gifting funds to help your children purchase property