Be aware that some mortgage providers won't make offers (or less good offers) in these circumstances. If done informally, it can be glossed over, but if drawn up by a solicitor, needs to be formally declared.
This is what we have done, but I have to say that we trust our children implicitly, and made a decision not to worry about interest:
The money has been legally declared a 'gift'. In our wills, we state that all money given formally (and we keep a record) goes into 'hotch-pot'. That means that, for example:
Child 1 has been given £20k
Child 2 has been given 10k
Child 3 has been given nothing.
Estate worth £600k, divided 3 ways means:
Child 1 gets £190k
Child gets £200k
Child 3 gets £210k
So it all evens up.
In the meantime, any of them are welcome to repay the loan and have it removed.
Of course, not everyone can do that, as we don't anticipate needing the money soon, and have discussed options (such as them re-mortgaging their home) should it be needed.
We do understand the pitfalls, but I offer it as a possible, and in some circumstances, simple, solution.
Otherwise, you could consider a 'joint purchase' with you having a certain charge on the house. you would do well to talk to a mortgage broker as well as a solicitor.
