Mothers are not always rewarded for helping their child

Parents are leaving themselves open to financial problems by lending their children money without any legal advice according to QualitySolicitors.com. Failed relationships and family fall outs are cited as factors that see many parents lose the money they have given their loved one.

A third (33%) of parents in the South West now see it as their ‘parental duty’ to contribute to their child’s first property purchase, with nearly half (49%) gifting over £10,000 to their child and one in eight (12%) over £50,000, according to new research from QualitySolicitors.

In the process, parents in the region are making major sacrifices, with one in five (20%) of parents in the region remortgaging their own property to help raise funds to contribute to their child’s property. Only London parents are more likely to remortage (28%). However, the vast majority have no protection in place for their gift, with 95% saying they simply handed the money over with no legal advice and ‘hoped for the best’.

That means should their child’s circumstances change, for example splitting from their partner or falling into negative equity, the money could be lost. It also leaves children exposed to potential sibling disputes should a parent die.

QualitySolicitors, the leading network of UK solicitors, has recently launched a series of top tips to give legal and life advice to parents to help better protect themselves, their children and their money. The mini guides also include advice for buyers that are entering into property arrangements with other people eg. buying with friends.

Parental sacrifices

According to the research, only 5% of parents in the South West take any type of legal advice before contributing to their child’s purchase. This is all the more surprising given the sacrifices they make to help their children out, with the vast majority (65%) dipping into their savings and a further one in 20 (5%) selling their own home and downsizing.

Funding the purchase

As well as drawing on the bank of Mum and Dad, first time buyers across the region are looking at other ways into the property market with one in eight (12%) saying they have bought or will buy with a close friend. A further 4% buy in order to become a ‘live-in landlord’, bringing in a tenant to help with mortgage repayments.

Surprisingly though, 46% of buyers in the South West entering into property arrangements say they’ve not even had an ‘informal discussion’ with the other parties involved about what would happen should their circumstances change, such as being made redundant, relationships breaking down or needing to sell the property.

Misplaced investments

One in 20 parents in the region see their contribution towards the property purchase as an investment. However, without the proper legal paperwork in place, there is nothing to protect their contribution should their child view it as a gift. Just 3% said they had something in writing outlining exactly what had been agreed with their child.

In the dark

Around half of parents (44%) of parents in the South West said they did not feel fully aware of the legal implications and obligations of giving financial support to their child. First time buyers are as much in the dark as their parents – over half (59%) said they did not understand fully the legal implications of getting financial support from a third party.

Buyer concerns

Three quarters (73%) of first time buyers in the region who have accepted financial support admit having concerns about accepting it. A third (31%) feel worried that they’ll never be able to repay the loan. A further quarter (27%) feel guilty about owing someone else money and 15% feel ‘caught in a trap with no way out’. One in eight (12%) even admit to feeling ‘resentful’ that they’re ‘financially obligated’ to others.

Martyn Morgan, Conveyancing Expert at QualitySolicitors, said:

“It is natural for parents to want to do as much as they can to help their children get a foot on the ladder. However, the research shows that often their goodwill is misplaced and can actually lead to more problems further down the line if something goes wrong."

“Our message would be protecting yourself isn’t a sign of mistrust. Far from it. It’s actually the best way of protecting the long term relationships you value. Our mini guides are designed to help those entering into property arrangements to navigate the issues we see time and again and get people thinking about protecting themselves better. Protecting yourself doesn’t have to be complex or costly and it can save heartache and tens of thousands in the longer term.”

To view the guides, visit: www.QualitySolicitors.com