Gifts, Loans and Help from Family: How to Keep It Clear and Legal
Financial help from family or friends can make the difference between securing the property you want and not being able to proceed. It is important to agree the terms of that help in advance and have them properly documented. Without this when buying a home with help, misunderstandings can arise, particularly if circumstances change.
Assistance may be in the form of a gift, a loan, or an investment in return for a share of ownership. It can come from parents or grandparents, but also from other relatives, close friends, or chosen family. For the full buying process, see our Buying in Scotland guide. ++++
Types of Financial Help
- Gift – Money provided without expectation of repayment or any share in the property.
- Loan – Money to be repaid either on a fixed schedule or when the property is sold.
- Investment – Money provided in exchange for a share of the property.
Each type of contribution has different legal and, in some cases, tax implications. Establish which applies at the outset.
The Importance of Clarity
Informal arrangements can work while relationships are good, but even close family or friends can face difficulties if there is no written record of what was intended. New partners, children, changes in employment, or disagreements about the property can all cause tension.
Hastings Legal can prepare documentation to reflect the agreement reached, ensuring that the terms are fair, unambiguous, and enforceable.
Documentation
- Gift Letter – Usually required by a mortgage lender to confirm the funds are a gift and no repayment is expected.
- Loan Agreement – Sets out repayment terms, interest (if any), and provisions in the event of a sale.
- Co-ownership Agreement – Records ownership shares, arrangements for ongoing costs, and procedures for sale or buy-out. Read our Title Deeds & Co-ownership guide. +++
Hastings Legal will ensure documentation reflects the true intention of the parties and meets any lender requirements.
Mortgage Considerations
Mortgage lenders apply strict rules where funds come from third parties:
- A gift must normally be unconditional and from a source acceptable to the lender.
- A loan may affect the amount the lender is willing to provide, as it alters the buyer’s financial position.
- If the person providing funds is to be an owner, they will generally be named on the title deeds.
Inform Hastings Legal of any financial assistance at the earliest stage so lender conditions can be met without delay.
Protecting the Contribution
- Title Deeds – Ownership shares can be stated in the title itself. See our Title Deeds & Co-ownership guide.+++
- Minute of Agreement – Useful where the buyer is cohabiting but unmarried.
- Trust Arrangements – Appropriate where funds are provided for the benefit of a child.
Hastings Legal can advise on the most suitable method to safeguard the contribution while ensuring the purchase proceeds smoothly.
How Hastings Legal Can Help
- Advise on the most appropriate legal structure.
- Prepare the necessary documentation.
- Liaise with the mortgage lender to ensure their requirements are met.
- Coordinate with all parties to minimise delays.
Contact us: If you are buying with help from family, friends, or chosen family, contact Hastings Legal as early as possible. We will make sure the arrangement is clear, fair, and properly documented to protect all parties.
Call 01573 226999 or email enq@hastingslegal.co.uk
