In the current financial climate, it’s increasingly common for parents to assist their children financially in purchasing their first home. Despite Government initiatives such as the KiwiSaver HomeStart grant, the New Zealand property boom is making it increasingly difficult for young adults to manage such a significant investment alone.
If you’re a parent wanting to help your child take their first step on the property ladder,it’s important to understand the technicalities around loaning or gifting a financial contribution. A clearly documented set of terms can alleviate any unforeseen future complications and mitigate any potential financial loss.
At Lyon O’Neale Arnold we can talk to you about your options for documenting a gift or loan. If there is an expectation that you will receive a share of the home’s value in the event of a sale it’s important to document this to protect your contribution.
One such arrangement is a Deed of Acknowledgement of Debt which sets out the terms of the contribution, whether it’s an interest-free loan, repayable only on demand or if there is a payment schedule agreed upon between you and your child. Additionally, there can be terms set out regarding how your loan is repaid in the event of a relationship dissolution between your child and their partner.
In the event of separation, without set terms your child’s partner may be eligible to half the value of the home and not legally bound to repayments. In a Deed of Acknowledgement of Debt,repayments would be recorded as a debt of the relationship and would continue as set out in the terms of the agreement.
Helping your child into their first home is an incredibly generous gesture. At Lyon O’Neale Arnold we have property law experts that can help you document the transfer of funds in a way that protects your asset while enabling your child to get on the property ladder.
For more information please visit our website www.loalaw.nz