Lending money to buy a house

Kontiki

My daughter is currently buying a house & we are lending her the money to get on the property ladder. In reality we might never see the money again & we hope that we are not that desperate to need it.
Because of various friends & work colleagues who have done similar things in the past & come unstuck we decided we would protect all involved by getting it set up legally using the solicitor representing the daughter for her house purchase.
This where there seems to be a problem, when we spoke to the solicitor she said we could set up a trust deed & the daughter would be liable to us for either the loan + interest or we have a share of the value of the property. We opted for the value of property which worked out at 53% of the current value, the first draft we had said that the daughter would owe us the loan plus interest at the bank of England rate?? When we contacted the solicitor to say this isn't what we agreed she did another draft this time saying that after all the estate agents fees - mortgage & legal costs are paid we have shares 53% for us & 43% to the daughter??? My interpretation was that we now end up with 53% of what is left not of the actual value. Whe we saw the solicitor again she said she would word it better but again it seems that the wording implies that our share of the property is the value after everybody else takes their cut!!
I know its a bit academic as I said we don't expect to be in a position where we need the money back but we are trying to protect ourseleves & our other daughter. As we are having to pay the solicitor about £70 for a one page document to cover all parties legally & fairly I am starting to get a bit annoyed. Do we actually need to have this done by a solicitor, I would have thought that it should be quite simple that the daughter owes us 53% of the value of the sale of the house. If the value of the house goes down (unlikely) we will share the loss if it goes up we share the profit.

jonesMUFCforever

Are you lending her the whole amount of purchase price or just deposit?

jonesMUFCforever

Are you lending her the whole amount of purchase price or just deposit?

jonesMUFCforever

Just re read your post again and the advice you have received seems a bit off to me,unless this trust deed actually means a second charge is registered in your name at Land Registry.
If not your daughter could get 2nd 3rd mortgage etc etc and minimise the amount left to you in a forced sale basis.
The best you can hope for is a deed showing that you actually get 53% of what is left - first call would be prior mortgages then yourself but you would only get net amount ie what is left after solicitors fees and estate agent fees which might or not be more than what you have lent your daughter.
I expect that this is when the trust deed will kick in ie if the house is sold at negative equity you would be able to claim from your daughter any losses but only as an unsecured creditor.
Take care

Xbigman

As this is a 'friendly' loan and not a business why worry about the odd %. Just split the property ownership 50/50. Anything else just ends up over complicated.
Regards



X

Kontiki

One of the reasons we were doing it this way as we will be listed on the deeds as having an interest in the property & the daughter will be unable to take out another mortgage or loan against the house, or anybody who might live with her would not have any claim against our stake in the house. We are not on the mortgage as that is her responsibility.
We are lending her just over 50%, I did tell the solicitor a 50/50 split is near enough for us. The problem with the wording of the trust deed was as I see it as it stood if the daughter was to sell the house staight away (unlikely) we would get 53% of the amount left after everybody else is paid, in other word 53% of what we have lent her!!
The amount we are lending is £60k if we were to have the deed as it was that she owes us the amount + the Bank of Eng. rate (4.5% ) then the loan would grow by £2700 accumulating. It could end up that she would owe us more than the house was worth. We thought the fair option would be on the value of the house & we share the risk or reward.
It is likely that we will never see our money again unless our daughter sells up - earns a lot more - maybe marries somebody rich or wins the lottery. The idea of setting this up was to protect us all for any event that we don't yet know about, there is nothing written in the deed about her having to pay us back or anyway we could insist on getting the money.

jonesMUFCforever

Kontiki wrote:

It is likely that we will never see our money again unless our daughter sells up - earns a lot more - maybe marries somebody rich or wins the lottery. The idea of setting this up was to protect us all for any event that we don't yet know about, there is nothing written in the deed about her having to pay us back or anyway we could insist on getting the money.

Then I have to ask the question why bother?
You either lend money to your daughter on trust or you don't.