Bank of Mum and Dad - Loans to children
In these difficult financial times with high property prices and increasing interest rates, a number of parents or relatives have sought to support younger family members to enter into the property market by providing financial assistance.
The form of assistance varies from case to case, depending on the financial resources of the parents and the circumstances of the child being supported. Some arrangements are of gifts of funds, some are made as loans and each can have significant implications that need to be carefully considered before the funds are provided.
If funds are provided as a gift, the parent needs to understand that the funds may be lost in the event of domestic relationship breakdowns or in some cases where the child dies. There can also be implications for the parents if they are receiving any Centrelink benefits that need to be considered.
In the case where the funds are provided as a loan, this needs to be carefully documented and security recorded against the property, if possible, although this may impact on loans being obtained from financial institutions.
In any situation where funding is proposed to be provided to family members, please seek legal advice before the funding is provided to ensure that the arrangements are clearly understood and documented appropriately for the benefit of all parties.
If you have any queries regarding a family loan, please contact Deborah McCloskey in our Property Team on 03 9737 7377 who can assist you in this area.
Written by RNG Lawyers Property Law Team, Barry Northfield