Be prepared for Bank of Mum and Dad debt call
Home-buyers who turn to the “bank of mum and dad” and increasingly the bank of grandparents to buy their home to prepare for the all eventualities, as generous family members tighten their belts.
Many people have no choice but to turn to parents or other family members to help raise a deposit for a house without considering potential future pitfalls, even the possibility that their family lenders might need the loan back.
Handing over a large amount of money, which could be life savings, with no legal structure in place is a minefield. Circumstances can change drastically. Couples buying their first home might borrow from their parents when they buy, but what happens if they subsequently separate?
There are potential problems in relation to who owns what and raises the prospect of disputes. It is important to consult a solicitor on loan agreement terms, even with family members, to avoid what could become a family fall-out.
In these times of economic uncertainty, it is very possible that the bank of mum and dad needs to call in its debts. An agreed timetable for repayment can help to ease any potential problems for all parties involved.