Bank of Mum and Dad urged to protect financial contributions
Thursday 19th December 2013
Marsden Rawsthorn residential property expert Barbara Haddleton is urging parents to protect mortgage deposits as more and more first-time buyers rely on financial assistance from the 'bank of mum and dad'.
In the last year, Preston and Chorley-based law firm Marsden Rawsthorn Solicitors has seen an increase in Declaration of Trust registrations.
A Declaration of Trust is a legally binding written agreement to record the financial arrangement between property owners. The document provides security for individuals who are contributing financially to a purchase of a property or in an event where the property needs to be sold and the equity needs to be divided according to the original contributions, such as after a break up or falling out.
Barbara Haddleton, senior residential conveyancer at Marsden Rawsthorn, believes the increase in equity contributions and Declarations of Trust is due to first-time buyers relying on parents to assist them with deposits.
She said: “As more first-time buyers look to get on the property ladder, parents become the first port of call for financial assistance for deposits as Purchasers are finding the required deposit to be unaffordable. What most people don’t realise is that large sums of money given as a gift are not secure for the contributor if the relationship breaks down and the property needs to be sold.
“A Declaration of Trust sets out what happens to the equity if owners decide to sell their property and what proportion of the sale proceeds each owner/contributor will receive if the property is sold following repayment of any mortgage.
“Parents should look to complete a Declaration of Trust at the time of their children purchasing a property if the parents have contributed towards the deposit . A Declaration of Trust is often prepared at the same time as purchasing a property. It is important that the parties set out in writing their intentions of how the proceeds of sale of the property are to be dealt with in the future.
Barbara added: “Help to Buy will certainly reduce the level of deposit required, but even on an average-priced home, the required deposit would still be difficult for most first-time buyers looking to get on the property ladder in the next two years.”
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