With the high price of Sydney housing, many parents are helping their children enter the property market by lending or gifting deposits and guaranteeing their loan. While this is commendable, it’s important to understand that if you fail to formalise arrangements, you could regret this decision for years to come.
In particular, some mortgage brokers and banks are asking parents to sign “last minute” statutory declarations just before settlement. In this highly emotion-charged time, parents are foregoing their rights to seek repayment of the loan and/or claim any rights to the property should their child (or the child’s partner) fail to repay the loan.
Statutory declarations are legally binding so these parents have no recourse to claim repayment of the loan – even if their child and his/her partner break-up. Even worse, if these parents advance a portion of the deposit money to their child without a formal loan agreement, it is considered a gift. As a result, the parents have no rights to seek reimbursement of the funds.
Of course you want to help your children as much as you can, but when it comes to financial issues, speak to the team at Sashi Veale & Associates (SVA) or Wealth Planning Advisory (WPA) BEFORE you act.
For straight-forward, practical accounting, taxation and financial advice
call us on 02 8850 0388.