If your child does not have sufficient capital for a deposit or the earning capacity to obtain a good deal from a mortgage lender you may wish to lend your child the money so that, in effect, you become their lender.

It would be wise to formally recognise that the loan is a loan and not a gift and to arrange the terms of repayment with your child at the outset, so there is no misunderstanding later on. This would include the length of repayment term and your agreement can be evidenced in a formal Loan Agreement. The various terms of the Loan Agreement are set out here.

When a loan becomes a gift

You may wish to waive repayment at some stage in the future if you are able to afford it and then the loan will convert to a gift. This should be evidenced in writing with a formal Waiver and Deed of Gift. From an Inheritance Tax perspective the waiving of the loan will become a potentially exempt transfer (PET) and the consequences of this are that the capital amount of the gift at that point in time will be added to your estate on your death for Inheritance Tax purposes, if you do not survive seven years. Any tax payable as a result of the gift is payable by your child. If your child is able to pay the tax attributable to the gift, HM Revenue & Customs can request that the estate pays the tax.

Implications of lending for your Will

You may wish to consider within the terms of your Will either ensuring that the loan is repaid in full to the estate or that it is to be waived or settled against that child’s share of your estate vis-a-vis your other children. The loan, whether or not it is repaid to your estate on death, will be an asset of your estate and aggregated with your other assets to calculate any tax due by your Executors.

How to protect your loan

Please contact us to find out more about the ways to protect loan finance provided to help a child get on the property ladder. Please call or fill out our enquiry form and we will get back to you as soon as we can.

Contact us

Please contact us if you need to know more. You can fill out our enquiry form and we will get back to you.

If you can’t find the information you are seeking or just want a fuller explanation please call us. We have a number of offices in and around London that may be convenient for you to contact but we will be able to help wherever you are based.

  • London
    London City office: 020 7481 2422
  • Bromley
    Bromley office: 020 8464 4242
  • Surrey
    Surrey office: 01483 284567
  • Sevenoaks
    Sevenoaks office: 01732 457575
  • Chislehurst
    Chislehurst office: 020 8295 1989