Parents loaning money for house purchase

Jollygeek

Hi Everyone,

Little bit of background on my circumstances, I've recently been through divorce and now finalised, but no consent order, couldn't afford the extra costs. I have three children, one child lives with her mum and paying maintenance (not ex-wife's, previous relationship), one child living with me (ex-wifes) and one child who's my ex-wife's son from a previous relationship, but now over 18, but still living with me (i class him as mine, but legally not).

I have some debts I'm still clearing that total £17k, all payments up to date and hopefully debt free in 5 years, been good to get all that sorted and credit file is now excellent again.

My parents have enough savings spare to loan me £150k to purchase a family home to stop me paying rent, they see this as dead money and no security. They have agreed they can comfortably live in retirement, when they get there, if I pay £500 a month on an interest free loan.

I want to make sure the £150k is repaid to my parents if I die, they will need the money, just wondering what the best way is to make sure this is done from estate if the worse does happen.

I have various life insurance policies that should pay £300k on my death and equity in the property might increase over the years, so want to leave my kids with the money required, but want my parents to not suffer and get there hard earned money back also.

What I have found so far.....

1. Draw up a finance agreement
2. Make sure I have a Will, maybe state the loan within the will?
- leave the right percentages to each child (make sure they are named so step son is included)
- state loan agreement to be paid in full
- ask for a trust to be setup for the under 18 children for any inheritance, name my parents

Want to make sure any claims from the parents mum's to assets don't stop the loan being paid in full is what I'm after. If this means the sale of the property than I'm fine with that, with the children agreed to be in resident with their mum's if the worse happens.

I'm willing to do whatever is required (just free funds are limited, dont want more debt), to make sure my parents are protected from helping me out.

Thanks
Jolly

MovingForwards

Get the private mortgage added to the title deeds. That way if anything happens to you and the house gets sold your parents get repaid same as any mortgage company would.

Have a will drawn up to include who will look after the kids til they hit 18, dont forget to allow for an allowance to cover their upkeep (a trust), your estate can then pass to the kids when they hit the age you specify ie 18/25 etc and signed etc.

Make sure life insurance etc have beneficiary details, if appplicable/possible.

Jollygeek

Thanks, will check with the conveyancing solicitor the costs with adding the private mortgage to the title deeds as a charge, that sounds a safe way for my parents, have just read about this and shouldn't cost a lot to add them.

I will look into the trust for their upkeep have never heard of that before, so will look into it, makes sense for them to inherit the remainder when they hit 18/21/25, that's one to think about.

Jollygeek

No worries, have solicitors, just good to know what to expect and what to ask them about