Service update - due to planned essential maintenance our Online Service will be unavailable on Friday 28 January from 18:00 until Saturday 29 January 12:00.
Following the Bank of England’s decision to raise the Bank Rate by 0.15% to 0.25% in December 2021, Windfall Bond and Tracker Savings Bond rates increased by 0.15% from 1 January 2022. Tracker mortgages changed from 25 January and we have written to customers individually with revised payment details where the new rate exceeds the minimum rate (or ‘floor’) already applying to their mortgage. We will be considering our other savings and our variable mortgage rates after the Bank of England MPC meeting on 3 February. (Notice updated 19/01/22)
- Please note that the Premium Saver (5) has now been withdrawn from sale.
If you have opened an account, you may add funds until 3pm, 7 February 2022, after this no additions will be allowed.
How to avoid your BoMaD dream becoming a nightmare
Cue sound of stomping upstairs.
Loud teenage female voice: “If you hate me so much why did you bother having me!”
Slam of door vibrates through house.
“You’re still not borrowing the car!”
Roll forward 15 years
“But Dad! I thought it was a gift! The money for the house, I mean (tears). You never said it was a loan and now you want it back with interest!”
The joys of parenthood huh?
The above scene, which the author (a parent of teenagers) has just made up, is not too far from the recollections of customers the Family Building Society has consulted over the years.
It demonstrates one of the classic pitfalls of the Bank of Mum and Dad, now popularly known as BoMaD.
There are many more:
Mr and Mrs Lloyd are helping their daughter purchase a property. Their daughter’s partner will be living there but won’t be named as an owner of the property.
No documentation, such as a tenancy agreement or a living together agreement, is drawn-up to formalise the arrangements.
Mr and Mrs Lloyd’s daughter and her partner split up and he refuses to leave the property. He now holds them to ransom if they want to sell the property, in which he may also have acquired some financial interest despite making little or no financial contribution.
Tom is buying a property and is getting some money from his mum. Tom and his mum are required by his mortgage lender to document the money being provided by Tom’s mum is a gift.
Tom and his mum view the requirement of his mortgage lender as a formality but agree between themselves that Tom’s mum is providing a loan.
However, they don’t make a formal Loan Agreement and Tom agrees to pay back the money as and when he can. Tom loses his job, defaults on his mortgage and the mortgage lender takes possession of the property.
The property is sold by Tom’s mortgage lender and as there was no formal agreement made regarding the loan, his mum is not entitled to any repayment whatsoever.
To make a bad situation worse, Tom’s mum dies within seven years of him purchasing the property and Inheritance Tax must now be paid on the money.
The above scenarios, though both fictional, are examples of the horror stories we get to hear about. The Family Building Society exists to help families help each other in acquiring a first home for the younger generation, but as we know the Bank of Mum and Dad is hard put upon and not everyone knows the rules.
We’ve put together a simple guide to all the potential legal pitfalls involved in these transactions and how to avoid them.
Proper preparation and planning is by far the best way to avoid angry recrimination, argument and bitterness.
And door slamming.
The content of this blog is Steve McDowell’s personal opinion and comment, and views expressed here are his and unless specifically stated, are not those of Family Building Society. The content on this page is not intended to be advice in any circumstances.