Parents asked to invest in children’s property

Parents in Belgium are increasingly being asked by banks and lenders to buy a 10% stake in the property their children wish to buy, otherwise they will not give them a mortgage. If the children are still at the beginning of their careers, do not have a high enough deposit or a stable enough job, banks are increasingly seeking reassurances from parents, says John Romain of mortgage advisors Immotheker. They require the parents to acquire at least 10% co-ownership of the property, as well as sign the loan for the same amount. The legislation was tightened in 2010, says Moniek Delvou of Belfius, meaning it is no longer enough for someone’s parent to agree to be guarantors – they now have to buy a stake in the property. Courts increasingly find in favour of young owners if something goes wrong with mortgage repayments, and banks then find it difficult to recoup their money by selling the property. The banks limit the required contribution from parents to 10% to keep the children’s tax benefits as high as possible. Despite this relatively small percentage, parents are deemed equally liable if things go wrong with mortgage repayments. If, after a while, the children’s income or economic situation has increased to the bank’s satisfaction, they can reclaim sole ownership of the property by paying 2.5% of its value to the tax authorities.