Question: I would like to help my 19-year-old student daughter buy a house to live in and rent rooms to her friends. She has a £30,000 deposit and I propose to lend her £30,000. I think I would prefer it to be solely in her name but me and my wife will probably have to underwrite it with our own house or company investments. What do you think is the best way forward?
Answer: The £60,000 will not be enough to buy a property, and your comments suggest you are prepared either to remortgage your house or perhaps sell shares to raise the required balance. If you choose to do this and buy the property in your daughter's name, it would be wise to have a detailed declaration of trust and possibly also a loan agreement, which could be secured against the property if you wish. This will clarify ownership and protect your interests. A restriction in your favour should be placed on the title register so your daughter can't sell without your consent.
The trust should confirm such matters as: the amount of your daughter's deposit; your £30,000 loan and how the balance is made up; how the loan is to be repaid; interest payable on the loan; what is to happen on a future sale and grounds for selling; responsibility for maintenance, insurance and letting, and how any increase in value of the property is to be shared.
Before doing anything, review your financial position and estate planning with your accountant or solicitor to be sure you can afford it and to find the best way to structure the purchase.
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