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Aston Lawyer
Aston Lawyer, Solicitor
Category: Law
Satisfied Customers: 10550
Experience:  Solicitor LLB (Hons) 23 years of experience in Conveyancing and Property Law
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I am buying a house with my son. I will provide the deposit

Customer Question

I am buying a house with my son. I will provide the deposit (£250k) and he will have a mortgage £495k. As he is an IT contractor there are very few firms who will consider giving him a mortgage. The Halifax have offered him a mortgage in principle. The condition of him having the mortgage is that I give him the money and have no interest in the property. I will also be living in the property. I need to have some form of agreement put in place to ensure that I can get my investment back at some point in the future - some sort of legal IOU. What would be the best thing to do from my point of view?
Submitted: 2 years ago.
Category: Law
Expert:  Aston Lawyer replied 2 years ago.

Hello and thanks for using Just Answer.

My name is ***** ***** am happy to assist you with your enquiry.

Not sure if you are going to like my answer, but here goes-

Your son's Mortgage Lender will require confirmation that no third party has any financial interest in the property, or they are unlikely to offer a Mortgage to your son. Hence why they require you to sign a form/simple letter confirming that the money you are giving your son is a gift.

Likewise, your son's Solicitor, will be under a duty to notify the Mortgage Lender if

he finds out that the money you are giving is some sort of loan/or is potentially repayable.

Therefore, you are somewhat stuck to protect your financial interest, as it will jeopardise your son's Mortgage.

You will still be able to protect your interest, however, provided you are happy to do this shortly AFTER your son has completed his purchase.

A Declaration of Trust can be prepared, setting out the fact that the £250,000 has been provided by you and that upon any sale, this sum is repayable.This document will be signed by you and your sonand will be evidence of your financial interest. To protect you further a Restriction can be registered at the Land Registry, meaning that your consent will be required, before any future sale of the property by your son can be completed.

Please note that you will need to instruct a different Solicitor to the one acting for your son.

Please also note that even once the Declaration and Restriction have been completed, your financial interest ranks behind the Mortgage Lender's- eg if the worst came to the worst and the house was repossessed, the Lender would be entitled to their money back first, to include any further mortgage advance which your son may obtain at a later date from the Bank and you would only be entitled to "claim" your £250,000 from the remaining equity.

I hope this clarifies the situation and sets out the legal position.

Kind Regards

Al

Aston Lawyer and 2 other Law Specialists are ready to help you
Expert:  Aston Lawyer replied 2 years ago.

Hi Judy,

Can I assist you any further?

If not, I would be grateful if you could leave positive feedback.

Kind Regards

Al

Customer: replied 2 years ago.

Thank you for the information. I'm pleased that something can be done. I have one more question - what are the tax implications if me giving him the money now and what would be the tax implications of him giving the money back in (for example) three years?

Expert:  Aston Lawyer replied 2 years ago.

Hi Judy,

Thanks for your positive feedback. There are no real tax implications as such- no tax will be payable on the date you make the payment nor on the day it is repaid.

Until the monies are repaid, for Inheritance tax purposes,the £250,000 will be treated as forming part of your Estate.

Kind Regards

Al