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  • FIRST POST
    • stranex
    • By stranex 12th Apr 18, 4:33 PM
    • 27Posts
    • 3Thanks
    stranex
    Parent to child loan
    • #1
    • 12th Apr 18, 4:33 PM
    Parent to child loan 12th Apr 18 at 4:33 PM
    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 c30k 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!!!!
Page 1
    • Fireflyaway
    • By Fireflyaway 12th Apr 18, 4:58 PM
    • 2,106 Posts
    • 2,441 Thanks
    Fireflyaway
    • #2
    • 12th Apr 18, 4:58 PM
    • #2
    • 12th Apr 18, 4:58 PM
    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!
    • venison
    • By venison 12th Apr 18, 8:18 PM
    • 2,614 Posts
    • 2,989 Thanks
    venison
    • #3
    • 12th Apr 18, 8:18 PM
    • #3
    • 12th Apr 18, 8:18 PM
    Could parents not make payment direct to the lender,and pay the stamp duty for you?
    Looking forward to 2019 after a terrible 2018...onwards and upwards
    • stranex
    • By stranex 14th Apr 18, 7:52 PM
    • 27 Posts
    • 3 Thanks
    stranex
    • #4
    • 14th Apr 18, 7:52 PM
    • #4
    • 14th Apr 18, 7:52 PM
    Could parents not make payment direct to the lender,and pay the stamp duty for you?
    Originally posted by venison


    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
    • By stranex 14th Apr 18, 7:55 PM
    • 27 Posts
    • 3 Thanks
    stranex
    • #5
    • 14th Apr 18, 7:55 PM
    • #5
    • 14th Apr 18, 7:55 PM
    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?
    • zx81
    • By zx81 14th Apr 18, 8:45 PM
    • 19,674 Posts
    • 21,071 Thanks
    zx81
    • #6
    • 14th Apr 18, 8:45 PM
    • #6
    • 14th Apr 18, 8:45 PM
    This is where the rules seems silly. The money all goes into one "pot" (my bank).
    Originally posted by stranex
    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
    • By enthusiasticsaver 15th Apr 18, 12:39 PM
    • 7,399 Posts
    • 16,339 Thanks
    enthusiasticsaver
    • #7
    • 15th Apr 18, 12:39 PM
    • #7
    • 15th Apr 18, 12:39 PM
    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?
    Debt free and mortgage free and early retiree. Living the dream

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