Loan Agreement for Property Purchase

[beachranger444]

My DD is in the process of purchasing her first house and I have agreed to gift her an amount and loan her a second amount. Loan Agreements are available online for free and to my mind, if you print them out, date and sign them in the presence of witnesses who also sign, that should be sufficient, shouldn't it? My query is, why are her solicitors insisting that I must get my own solicitor to have this document drawn up? They are perfectly happy for me to print out a Gift Deposit Form for the other amount, sign it and return it to them without the involvement of another solicitor, so why so different?

I’m not a lawyer but would say that the gift deposit form is just to satisfy that the money isn’t the product of crime, money laundering etc but the loan agreement written by a solicitor is for your own protection, should you decided to go to court on non-payment of the loan

Is your DD getting a mortgage in addition to your gift / loan?

No, she won't be getting a mortgage. Does that have a bearing on it?

Only insomuch as it would make it much more complicated if she was getting a mortgage as the loan repayments would need to be worked into affordability and the lender would typically not be happy with additional borrowing being used for the purchase.

I’m not sure why the solicitor is insisting you take advice but I suspect it’s to ensure you are not putting yourself in any financial hardship and that you understand the implications of what you are doing. It is inherently more complicated than a gift and I would imagine the solicitor wants to make sure the agreement is suitable for the situation but doesn’t want to actually do that work themselves.

Will you daughter be the sole owner of the property on day 1? If so and you want to bypass the need to get a solicitor yourself then you could just say you are gifting her 100% of the money and put the agreement in place after. I assume you trust her to pay it back if you are not taking a charge on the property and you are happy to use a standard loan agreement / not take advice on it.

If you are taking a charge on the property then you need to do it via the solicitors.

I have just been having a similar conversation with solicitor. This is what she said

I can of course assist with your child's purchase; however, I could not also act for you in relation to the loan.

Therefore, I can either act for you in the preparation, negotiation and completion of the loan; working with another solicitor acting on behalf of your child or, I can assist your child and either correspond with you as a lay person without a solicitor, or another solicitor of your choice. If you choose to not be represented, then I can provide you with a simple legal charge over the property, but I cannot advise you on the same.

It might be that she’s seen the loan document and thinks it’s rubbish for you - but can’t advise that as you’re not her client. But honestly, I say that kind of thing to my clients as evidence I’m clearly not advising on it so there’s no expectation that I am. I don’t actually care whether they take advice or not.

It’s up to you whether you take advice, but you might be in a worse position if you don’t (for example, are you taking a charge on the property? Who’s filing this? And if not, why not?).