Gifting money to family members: is it better to lend or “gift” money towards my son’s flat deposit?

Question: If I provide my son with a significant sum of money for a deposit towards a flat he wants to buy, is it better for me to “gift” it to him or lend it to him?

Answer: Bear in mind not only your current financial circumstances but your likely future expenditure and financial commitments.

Consider whether you can afford to give money to your son at this stage, or if you should lend it to him so that he can repay it in the future, with or without interest.

If your son plans to get a mortgage to help fund the purchase it is important to note that most lenders require money paid by a family member towards a deposit to be a non-refundable and unconditional gift.

Furthermore, most lenders will not accept a deed of trust or second charge to protect the gifted money and would require a written declaration or letter signed by both you and your son confirming the gift.

They may also require written confirmation from you that you do not, and will not, claim any interest in the property.

This is in case your son defaults on the mortgage payments and the lender has to make an application to court to repossess the property.

If you had an interest in the flat you might be able to obstruct their application for repossession.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

If you have a question for Fiona McNulty, please email or write to Legal Solutions, Homes & Property, Evening Standard, 2 Derry Street, W8 5EE. Questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a solicitor specialising in residential property.

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