Bank of Mum and Dad is 10th largest mortgage lender in the UK

By Ian Creighton

The amount of money contributed by parents of homebuyers in Northern Ireland and the rest of the UK increased to £6.3billion last year, making it the tenth largest 'mortgage lender'.

According to research by Legal and General the average amount given by parents to help assist with buying a house was £24,100, up by £6,000 compared to the previous year. Over half of parents are using cash to provide the financial assistance, but others are withdrawing money from their pensions, a practice which can potentially cause financial difficulties during retirement. Of those parents surveyed approximately 20 per cent said that they felt it was their personal responsibility to help their children get on the property ladder.

The £6.3billion lent by parents is not too far away from 9th placed mortgage lender Virgin Money with £6.8billion of mortgage borrowing last year, but is well behind the biggest lender, Lloyds Banking Group, which arranged mortgage loans totalling £42.5billion.

The Bank of Mum and Dad-in-law

There are a number of options available to parents who want to help their children buy their first home. They can simply make a gift of the cash without any obligation for it to be repaid or without their loan being secured against the property, but some parents are concerned that their gift is being made to their child and their partner. The house will be an asset that will be divided in the event of a separation or divorce, so some parents are not comfortable with the idea that their child's partner will essentially receive half of the money they have gifted.

As such, some parents choose to have their loan registered against the property as a private mortgage. This means that in the event of a sale of the property the amount they gave at the outset would need to be repaid out of any sale proceeds. They may of course not insist on this when the time comes, but in the event of a sale as a result of separation many parents will want the amount to be repaid to them, and they can decide if they then want to give this to their child again to help with their new house purchase.

If you are making a gift of money to your child to help fund a house purchase you should consider whether you want to frame the contribution as a gift or a private loan or mortgage. You should discuss this with your solicitor, and you should also note that the property conveyancing solicitor who acts for the person buying the house will need certain information from you in respect of your contribution. They will need to verify your identity, and they will also want evidence of how you accumulated the money that you are giving, and evidence of it being transferred from your account to your child. The solicitor is required to do this under Money Laundering Regulations.

If you require a property conveyancing solicitor in Northern Ireland to act for you in a house purchase or any other residential property matter, contact Wilson Nesbitt in Belfast or Bangor by clicking here.