Calling time on the bank of mum and dad

Calling time on the bank of mum and dad?

The current stamp duty holiday may be one major reason to consider a climb up the property ladder. But for first-time buyers, news in recent weeks that one of the UK’s biggest mortgage lenders, Nationwide, has temporarily tightened its rules around deposits could come as a blow. For some it will have dashed hopes of relying in a major way on the so-called bank of mum and dad.

While Nationwide customers who are first-time buyers may be able to put down as little as 10% as a deposit, the lender has said that those buyers must be able to show that at least 75% of that deposit comes from their personal savings.

Of course, this is just one lender and there are other options for those keen to buy their own home. The bank of mum and dad has proved an extremely useful source of funding for many of our property clients over the years. And for as long as the older generation is willing and able to pass on assets during their lifetime, these financial contributions (in various forms) will continue to be vital for some property buyers. In that sense, the bank remains very much open for business.

But whichever side of the arrangement you’re on – parent or ‘child’ – it is certainly worth getting some good legal advice at the outset. You both need to be on the same page; to understand the basis on which the money is being handed over, any tax implications, and what the gift or loan means in the longer term. The safest option when it comes to any financial transaction like this is to have an agreement drawn up in writing so that there is certainty on both sides and little room for dispute later on. If that sounds heavy-handed and unnecessary, trust us – we’ve helped deal with the aftermath of situations in which family members have sadly fallen out because of a misunderstanding or some deliberate act that leaves the other party feeling aggrieved.

The key message then is to make sure that however you intend getting onto the property ladder, make sure it’s on the right terms. Get good advice on the best mortgage for you and, if you are going to be asking mum and dad to help out, seriously consider putting in place some formalities around that.

For advice on any conveyancing matter, contact our conveyancing department on 01264 353411 and ask to speak to a member of the team or email online@bsandi.co.uk