Loans to Children

I would be interested in finding out more about this. Anyone have any idea???

If I provided a loan to my daughter and formalise it in writing/contract for the purpose of purchasing a property, how would this work if she split from her partner and they sold the property.

I assume the loan would have to be repaid from the proceeds of the sale.

This is all hypothetical, but I am looking at ways to protect my money just in case things went pear shaped.

MTR

 

It would be a debt reducing her asset pool. If properly set up and not a sham

 

You should get the mortgage registered on the title.

This will mean that on the sale of the property you will be repaid.

It also clarifies to the world, including out-laws, that the monies was always a loan and never a gift.

I have seen subsequent arguments that the loan was intended as a gift. A public register stops that.

And you should tell the out-law in a family meeting the deal so culturally everybody knows what is what. Legal documents should be a second step in stopping arguments after culture.

 

If your loan is the only borrowing, register a formal mortgage over the property.
Marg

 

You can register second as well.

 

Thanks that is what I needed to know.

Just think its important to protect what you have, I want to help my children, but we have already been through a serious break up and that cost me because I thought it would be forever, how naïve.

 

see also
Legal Tip 12: Parents Helping Adult Children https://propertychat.com.au/community/threads/legal-tipe-12-parents-helping-adult-children.736/

 

Can she support a loan on her own and this is just a deposit issue? If so perhaps either privately lend the deposit component or provide a family guarantee.

If for the full amount register a mortgage and document it accordingly. I would note from a practicality perspective if you're going down this path as no lender will give her the loan required, you have to ask why you would want to put your assets at risk (and your daughters) by lending money which may not otherwise be afforded.

 

We are just refinancing a loan where a relative has a second mortgage securing a loan made. The lender has indicated if the lender states that no interest is required to be paid or no repayments required then this loan won't be included in servicing.

 

Hi CB

Yes, she can afford the loan.

I want to protect my funds, she has a partner and if he moves in my funds are at risk?? My concern.
I would be paying deposit and stamp duty whatever that is, FHB??

 

You might want to consider lending her the money to pay the stamp duty too

 

that is what I was planning to do, she does not have these funds. Melb stamp duty highest around 6% I think??

 

My general rule-Family and money go together like water and oil..

 

That's a good consideration. Keep it as a commercial transaction with market terms, rates and documentation and go from there.

Best if possible to try get her to make an accelerated reduction in the principal so she can then refinance to a lender at the first possible time so the arrangement can be wound up. You never want something to happen which causes bad blood between family.

 

Family and money are a fantastic mix if done properly. Their is a natural competitive advantage compared to doing it outside the family.

 

What if the deposit was a gift? can you still set it up as a loan?

 

It will have to be one or the other, preferably documented clearly.
Marg

 

It's either one or the other.

 

which means you have no protection if gift it.

Alternatively you set up a loan and the rest is easy enough.

 

U can always convert a loan to a gift but not the other way around.

But what could be done is the gift is returned and then lent out. But many more legal consequences with this.