Question: Our son wants to borrow a huge sum from us – £25,000 – to buy his first property with his girlfriend. We're uneasy about giving such a huge sum away in case it all goes wrong (they've been together for 20 months) and they end up separating. I know it's a negative outlook, but is there any way he can protect that cash? We'll happily pay for legal advice if it'll make a difference.
Answer: In today's market first-timers must save ever-higher sums to scrape together a bigger deposit to qualify for an affordable mortgage – the typical deposit to buy a first home has risen to 21 per cent of the property's value.
On the other hand, it's the finances of their parents that actually matters more. More than eight out of 10 first-time buyers only now manage to clamber onto the property ladder thanks to a cash gift from parents, according to figures from the Council of Mortgage Lenders.
Your natural concern at lending such a sum is an unintended consequence of this financial fallout. But, there is plenty of legal protection on offer but it requires delicate questions that unwittingly test a relationship. When your son – having gratefully banked your generous donation - buys the property with his partner, their solicitor will first ask if they prefer to make the purchase as "joint tenants" or "tenants in common".
There's a critical difference, warns Melanie Bien at broker Private Finance, that can have a huge impact. "As it stands, joint tenancy is the most common choice for married couples when buying a home – it means they both own the whole property and so if one of you dies, the other then automatically inherits the other half."
But since your son isn't married, the alternative is to suggest he choose "tenants in common" instead, says David Hollingworth at broker London & Country.
"Here, he and his girlfriend will each own a specified portion of the property – and they can specify how much of the property each owns."
Crucially, if he or his partner were to split up (or die, say) the other share of property would not pass to the other party but would go to whoever is named in a will that would need to be written separately.
For even tighter protection of your cash, they could sign a "cohabitation" agreement – a de facto pre-nup for unmarried couples.Reuse content