The number of parents who do not seek financial advice before lending money to their children is dramatically high, a report by the London School of Economics (LSE) has revealed.
LSE, which surveyed 1,066 respondents representing a wide cross-section of depositor and mortgage members, including customers of Family Building Society, stated parents and children must be more business-like when money is given to get on the property ladder.
The report from LSE showed that out of those parents who gave money to their child to buy a property, only 8% sought advice from a financial adviser, while only 14% took legal advice. Of those parents who help children with mortgage payments, only 14% took financial advice, while only 12% got legal advice.
The LSE stated despite the 'Bank of Mum and Dad' now being the sixth largest lender, there are usually no written record of transactions or arrangements for repayment.
LSE's report also warned that families are failing to make clear whether the money is a loan or a gift.
According to Legal & General's own analysis produced for the third year in conjunction with economics consultancy Cebr, more people than ever, a staggering 27% of buyers, will receive help from family or friends. This means that the Bank of Mum and Dad (BoMaD), is equivalent to a £5.7bn mortgage lender.
In most cases parents are loaning the money; but the BoMad also includes grandparents, other family members, and even friends, who together have supported 108,800 of 316,600 First Time Buyer property purchases.
At the other end of the transaction, it is not just those starting out in adult life who are getting a hand up on the property ladder.
Legal & General's research reveals that 43% of buyers aged 35 to 44 received financial help from family and friends, with more than a quarter (26%) of those aged 45 to 54 still relying on BoMaD.
With these astonishing figures, it clearly highlights the growth of BoMaD as a way of helping their child take a step onto the property ladder. With this, It's incredibly important that those looking to contribute seek financial advice before loaning any money to help a child or loved one buy their first property to protect both theirs and their child's future.
If you or close relatives are looking to give your child or a loved one money to buy their own property, please do not hesitate to give us a call, we can provide you with the financial advice you need.