It comes as no surprise that with the rapid rise in mortgage interest rates experienced by homeowners over the last 18 months, “MORTGAGE STRESS” is now becoming a very real issue for many in the community.
This is particularly the case for first home buyers who may have purchased their property within the last few years and who have never experienced a steadily rising interest rate market.
As a consequence, it is common for parents and grandparents to want to help their children or grandchildren either by making a one-off lump sum payment or, by making regular contributions to mortgage payments, and or any of the other ongoing costs associated with owning a house, including council rates, electricity bills, and home & contents insurance.
Whether or not it is the intention of the person lending the money for the amount to be repaid at a future time, or whether the loan is one that is never to be repaid but instead to be considered as an early inheritance, it is important to evidence the basic terms and conditions of the transaction by way of a formal written document.
In most cases, this would be by way of a basic Loan Agreement.
Why is a Loan Agreement important?
- If the agreement is only verbal and not in writing, it is far more difficult to rely upon due to the fact that in most cases, it will come down to one person’s word against the other’s;
- In the case of a disputed Will, a loan agreement between the deceased and a child can be relied upon to help in the defence of the Estate against a claim made by a greedy child beneficiary, who may have already received their inheritance earlier, whilst the deceased was alive; and
- A written loan agreement will also rebut the legal presumption of “Advancement”, which is the concept adopted by the Courts that money given to a family member, in particular a spouse or child, will be considered to be a gift, unless there is evidence to the contrary.
Loan Agreements are relatively inexpensive and, for the reasons outlined above, they are well and truly worth considering if you are thinking of providing any financial assistance to members of your family.
For more information or to discuss your particular legal issue, please contact
Scott Williams on 0400 484 091 or sw@swconveyancinglegal.com.au.