Parent to child loan

stranex · 12 April 2018 at 4:33PM

OK, I know a lot here advocate NEVER loaning to family but please hear me out!

I am in the middle of a divorce. We are both very amicable and have agreed upon split of assets since before we were even separated. We are currently having this drafted into a consent order

We have just sold the FMH which completes next week. We have both placed deposits on new builds with mine ready in June and hers in Jul/Aug. I am in rented and she will move in with friends until her house is ready. She gets a much larger share of the equity on sale of the FMH due to my significantly larger pension fund.

I am about £15k short of the required deposit and stamp duty so my parents have kindly agreed to gift me c£30k so I can do that and have some left over. My wife is happy with this as she has what she needs completely. However, they're not keen to gift it me as my wife could then have claim, even though I wouldn't in a million years expect her to and she is very close to my parents. Trouble is, it will be seen as a joint asset in eyes of court/judge and will skew the figures we've agreed so far.

In order to prevent this, we are considering making it a "loan" which is written down and signed stating how much, that repayment is only upon sale of my new house (or my death) and that no interest is sought in my property. This will then show as a debt against me and our figures will tie up with what we originally agreed.

If we structure it as a loan, then I understand I must declare to the mortgage company. Questions (!)

Do I still need to do this if the agreement states no charge is sought against the property? Do we HAVE to have a charge registered? Someone said if we don't my wife *could* claim it's not legal and still seek her share of it?

If structured as a loan repayable upon sale/death....can this be changed later (ie after divorce) so that it becomes a gift instead? Does having a charge effect the ability to do that?

If I were to buy a 2nd property after the divorce, would having a 2nd charge on the first mortgage as discussed above affect the chance of successful application?

Well done for getting this far!!!!

Fireflyaway · 12 April 2018 at 4:58PM

No idea about the financial side but you seem to be getting along great and your wife even seems close to your parents. Maybe just don't split up!

[Deleted User] · 12 April 2018 at 8:18PM

Could parents not make payment direct to the lender,and pay the stamp duty for you?

stranex · 14 April 2018 at 7:52PM

venison wrote: »

Could parents not make payment direct to the lender,and pay the stamp duty for you?

I'm not sure to be honest but I would have thought the mortgage company would see payment to them by a parent as an obvious "gift" or loan and thus take it into account. Would also have to involve conveyance and sure they'd have questions about money laundering?

stranex · 14 April 2018 at 7:55PM

Did wonder, as an alternative, whether parents could just pay some bills, credit cards and new furniture instead so I only use my money for the house purchase. We'd both end up the same amounts coming out our pockets but they'd not be supplying funds toward the house purchase?

This is where the rules seems silly. The money all goes into one "pot" (my bank). How I then divide that money up (ie mine goes toward purchase and theirs go toward furniture and bills) is up to me. Paying bills direct just bypasses my bank account and the associated hassle?

[Deleted User] · 14 April 2018 at 8:45PM

stranex wrote: »

This is where the rules seems silly. The money all goes into one "pot" (my bank).

That's exactly what you want to avoid.

If her parents want to buying you a dining room table and a new TV, that's fine, but large sums going into your account will need to be accounted for.

enthusiasticsaver · 15 April 2018 at 12:39PM

Your parents understandably want to protect their gift/loan from your ex. Until your divorce is finalised there is only one way to do that which is to say it is a loan but I am not sure whether they have to have a charge on your property for that. You will need to disclose it to the mortgage company though but your parents may be able to say that they are happy for it not to be secured on the property which would be the cheapest and easiest option. That way in the divorce that amount could be declared as an outstanding loan you are responsible for. It should still be done officially and legal though with an agreement that a solicitor can draw up for you. I think if the mortgage company have a declaration from your parents that it is an interest free loan to be repaid on sale of the property (but not secured on it) and they are not seeking an interest in the property they should be satisfied with that.

In terms of the divorce finances you cite you are responsible for the loan and not your ex wife. Surely by then the money will be invested in your property so there is not a bid wedge of cash sitting around for her to claim on?

Parent to child loan

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