Buying a house jointly with parents
(Last Updated: 19/10/2023)
29/11/2022
116
7 min read
Buying a house jointly with parents' help can take place in a variety of different ways and needs to be carefully thought through. You should consider:
- Will your parents have an interest in the property? If they do, and they own another property, then the purchase will attract second home stamp duty at 3% and you'll sacrifice your first-time buyer relief. You can draft a Deed of Trust to confirm the interest split between the owners.
- Do you parents want the money back? Instead of having an interest in the property, your parents could provide an unsecured loan.
- Do you just need their names on the mortgage? Shared mortgages with parents, such as a Joint Borrower Sole Proprietor allow your parents to be on the mortgage, but not named on the legal title and with no beneficial interest.
We explain the processes for each scenario when buying a house jointly with son or daughter plus and click here to jump to What are the risks of buying a house jointly with parents (and how to protect yourselves)? . Your parents may also look to gift the property to you in the future via a transfer of equity. Read more on this here - Gifting Property to Children.
1. Buying with parents - on the mortgage and legal title
Where your mum and dad are going to be on the legal title with you, you'll be able to choose from a wide variety of mortgages. If your mum and dad have an interest in any other property around the world, then you'll also have to pay the 3% Additional Home Stamp Duty. For this reason, this type of purchase is often a buy to let.
2. Buying with parents - Parents want money back
With life expectancy on the up, your parents may need to have the money back from you to cover their retirement lifestyle. If your parents aren't named on the title or mortgage, then they could have an unsecured loan agreement with their child. You can agree upon the terms, like length of time to pay back and interest rate. Read more - Loan Agreement.
3. Buying with parents - On the mortgage, not on the title
This is the most commonly used process for a joint home purchase with parents. There are mortgage lenders who will allow your parents to be a party to the mortgage offer, but they won't be named on the legal title. This is called Joint Borrower Sole Proprietor.
Your parents will be involved during the mortgage application process, however, the child will have the solicitor handling the purchase for them. Due to the high risk of not having any benefit, but being 100% liable for the mortgage, the parents need to get Independent Legal Advice.
What are the different types of shared mortgages with parents?
Joint buy to let mortgage with parents
If your purchase is an investment, you can obtain a joint buy to let mortgage with your parents through a wide variety of mortgage lenders. You should draft a deed to set out the percentage split of any income from the property.
Joint home purchase with parents
If your purchase is for your home, then you need to consider the stamp duty implications of having your parents named on the legal title. You can avoid the additional rate by applying for a Joint Borrower Sole Proprietor mortgage.
You can obtain this type of mortgage through a few select mortgage lenders including HSBC, Barclays, Metro, Hinkley and a few others.
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Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
