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Three Top Tips For Bank Of Mum And Dad Use

With property prices increasing, saving up for the necessary deposit for a first home is getting harder and harder for young people – which is why more and more young are turning to the so-called bank of Mum and Dad. However, there are lots of issues that should be carefully considered before going ahead, either as the parent lender or the child receiving the money.

What Is The Bank Of Mum And Dad?

The bank of Mum and Dad refers to the increasingly common phenomenon of parents helping their children to buy their first home.

While it’s only natural for parents to want to help their children, and enable them to get on the property ladder as prices are so high and young people can be priced out of the market otherwise, it’s important to consider all the implications first.

Rhiannon Edwards, Residential Conveyancing Solicitor at Bartletts Solicitors, comments: “An estimated quarter of parents now provide the deposit for their child’s first home, and this high proportion is certainly the case with our clients. Most parents plan extensively before deciding to be the bank for their child’s first home, but not all do – and it’s so important to seek professional legal advice before handing over the money as parents or receiving the money as the child.”

3 Top Tips For Bank Of Mum And Dad Use

If you decide to be the bank of Mum and Dad for your child’s first home purchase or to use the bank of Mum and Dad to buy your own place, make sure you decide how this is done and think of any implications first.

  1. As a Gift
    If you decide to gift the money to your child, it’s important to be aware that there will be inheritance tax to pay on this amount if you die within 7 years of making the gift, and that you and your child understand this. Also, you need to decide on the details of the gift, for example, is it purely for your child or is it for your child and partner? And if it’s for both, what happens if their relationship breaks down?
  2. As a Loan
    If you decide to loan the money to your child, put an agreement in place beforehand to avoid any confusion and prevent any heartache at a later date. With a formal agreement, everyone knows what the terms of the loan are, including if any interest is to be paid and how/when the loan is to be repaid, from the start. It’s also important to consider different scenarios and make allowances for these within the agreement, for example, what happens if you need to ask for the money back at any point? This may be because your spouse dies and you need the money or you simply want it back so you can help your other children with their first property purchase.
  3. As a Gift or a Loan
    However you decide to help your child, make sure you consider the implications on your own financial planning and tax status first. Furthermore, you need to declare the gift or loan to the mortgage company straightaway and make sure they’re happy with the bank of Mum and Dad providing the funds.

We Can Help You With Bank Of Mum And Dad Use

If you’re thinking of helping your child to get on the property ladder or you’re considering using your parents for financial help with your first house purchase, you should seek professional legal advice beforehand.

There are multiple legal implications when it comes to buying property, especially when the purchase is funded by the bank of Mum and Dad. At Bartletts Solicitors, we have the experience and knowledge of every aspect of the conveyancing process and can advise you on your personal situation and the effects of your decision on everyone, either as a parent lender or a child receiving the money.

For legal advice and guidance regarding the so-called bank of Mum and Dad, please contact our conveyancing team on Tel: 01244 311 633 or freephone 0800 988 3674 or email