Securing a foothold on the housing ladder for your offspring is not so much de rigueur as necessary these days. According to Legal & General (L&G), £6.3bn was leant collectively by parents over the last year. As a comparison, the UK’s 10th largest lender, Clydesdale Bank, leant £5bn in the same time span.

Having researched further, L&G found:

  • The average parent contribution was £24,100
  • 56% of over-55’s helped family because they felt it was a ‘nice thing to do’
  • 19% felt they had a personal responsibility to help
  • 15% admitted they now had a poorer standard of living as a result
  • 16% used a lifetime mortgage to help fund family or friends
  • 21% cashed in ISA’s or used their pension drawdown
  • 9% cashed in their pension
  • 26% of this sector are now unsure they will have enough money for retirement
  • 29% said they would consider equity release in the future

Source: legalandgeneral.com

During 2019 the amount parents and grandparents have contributed has risen by around £6,000, showing an increasing feeling amongst the population as a whole that this is the best way to help the younger generation secure their future. Worryingly, statistics also showed that 44% hadn’t sought any advice whatsoever before lending.

Lending money to family can be a tricky area to navigate. Parents may feel pressured to lend and children may feel in debt to parents. It helps to be clear as to whether the money is a gift or a loan. If it is a loan, it’s then sensible to draw up a formal repayment agreement. This needs to include factors that may not be of consideration at the time of lending, such as what will happen if payments are missed or if the money is being loaned to a couple, what will happen in the unfortunate event of a split.

If the money is gifted, for example, for a deposit, again, there are certain legalities to abide by. The conveyancer dealing with the property will need to know about the gifted amount so that the appropriate documents can be drawn up. These may include written consent from the gifting party to say they have no personal interest in the property. Anti-money laundering checks will also take place in order to prove the gifted amount is legitimate. Both parties also need to be made aware of the tax implications.

Seeking advice before entering into being amongst the 10th biggest collaborative mortgage lenders in the UK, is just sensible. Rather than part with money that may leave you feeling insecure in the future, there are alternatives that may be better, such as equity release. Please feel free to contact one of our advisers. Recommendations are based on personal circumstances and will consider the options available throughout the market as well as helping plan for a secure future for all.