How can parents help a family member buy their first property and build in protection?

Parents often wish to gift or lend without proper legal documentation funds to help their children buy a property.


Financial institutions are wise to this and often request two years’ worth of bank statements as proof that the new home buyer has a good savings history. The two years’ worth of bank statements are some proof that the new home loan applicant can afford to pay a mortgage based on their savings history. This is the bank protecting themselves and weighing up the risk of lending to the new applicant.

Risk is another key factor here particularly for the parents. A sum of money ‘earmarked’ for home deposit should be documented
as such along with a feasible repayment plan. Proper legal documentation of a ‘private family’ loan is very important for future protection and to educate the beloved family member into the ways of the commercial world, the need for proper legal advice and documentation. This should serve to protect the parents ‘loan’ and the new home buyer from the loss of this deposit sum due to business risk or relationship risk. A relationship or marriage could mean the deposit funds are lost in a break up or divorce.