By teaming up with your parents to buy a house, you make yourself a low-risk borrower in the eyes of the banks and can avoid saving a big deposit. But there are risks.
Australia's high property prices have pushed many first home buyers to get help from their parents. Some parents gift their children money towards a deposit.
And some take the step of buying a house jointly with their children. According to Finder research, parents give their kids an average of $33,278 to help with a house deposit
Buying a house with your parents can boost a buyer's borrowing power and increase their chances of getting a loan approved. But mixing relationships and money can be tricky.
How can I buy a house with my parents?
There are 3 ways you can buy a house with your parents.
Buying the property together
If you are buying a house jointly with your parents, both you and your parents will be listed on the property title.
You and your parents must decide the ownership split and the ownership structure. And you will all be responsible for repaying the home loan. If either you or your parents fall behind on repayments, the other party is responsible for covering their share.
Help with the deposit
Your parents may have savings they can add to your deposit, or they might borrow some of the equity in their home to cover the cost.
In this scenario your parents are agreeing to provide you with funds to buy the house. But they likely won't be co-owners of the property. It's up to you to repay the mortgage.
Home loan guarantor
In this scenario you may have saved the deposit yourself and you'll be the sole owner of the property.
But your parents will use their own property (or other assets) to effectively guarantee or co-sign your home loan.
As guarantors, your parents may be responsible for repaying all or part of your home loan if you can't repay it.
Which bank? The bank of mum and dad
More than 60% of Australian first home buyers relied on some kind of financial help from their parents, based on Finder research from 2023. The so-called "bank of mum and dad" is worth an estimated $35 billion. Parents give their kids an average of $33,278 to help with their deposit.
What are the pros and cons of joint property ownership?
Pros
Enter the property market faster. In Australia’s expensive property market, co-buying with your parents may be the only way that some young Australians can realise their property dreams.
Increase your buying power. By using the equity in your parents’ home and sharing the repayments, you can afford to think bigger when choosing your first home.
Borrow less. By teaming up with your parents you could borrow less money, shrinking your loan size and making repayments more affordable.
Share the responsibility. Sharing the responsibility of loan repayments with your parents takes some of the anxiety out of the situation and means that you have a safety net if you get into financial difficulty.
Cons
Circumstances change. While you and your parents might be on the same page about buying a property now, will that still be the case in a few years’ time? As people’s lives change, so do their financial goals.
You and your parents are both liable for the loan. If you take out a joint loan for $500,000, you and your parents are both liable for the full $500,000 loan amount.
Your future borrowing power is reduced. If you find a partner and decide to buy a house together, the loan you already share with your parents could reduce your borrowing power.
The importance of ownership structure
Having a clear agreement in place is essential for all parties in a co-buying arrangement. Understanding how property titles work is also essential.
Tenants-in-common. This is the more popular arrangement and allows you and your parents to divide ownership of the property in whatever way you like, such as 60:40 or 70:30. Under this ownership structure, if one party dies, their share of the property is passed on according to the terms of their will.
Joint tenants. Under a joint tenancy arrangement, all owners on the title own the property completely. This is typically how married couples own a property. You can't simply sell your share of the property because you own it together.
Talk to a conveyancer before agreeing to buy a property with family members.
Did you know?
Our latest State of Women's Wealth Report reveals a clear gender gap in home ownership. Gen Z men are twice as likely to own a home outright compared to Gen Z women (18% vs 9%), and millennial men are 50% more likely to have paid off their homes (15% vs 10%). Overall, 46% of women say they're behind in their journey to home ownership, compared to 33% of men.
Get professional advice. Before you enter into a co-ownership agreement, make sure you get advice from a solicitor or conveyancer. This will ensure that you know exactly what you’re getting yourself into and what you need to do to protect yourself from potential risk.
Draw up a co-ownership agreement. It’s essential that you and your parents get a co-ownership agreement drawn up before you join forces. This agreement can outline how to split costs between parties, what happens if one party defaults on their repayments and what happens if the loan needs to be refinanced.
Have an exit strategy. Before signing on the dotted line, make sure you and your parents both have an exit strategy. How long do you plan on holding the property for? If one of you wants to sell up and move on, how will this situation be handled?
Update your will. If you select a tenants-in-common ownership arrangement, make sure you update your will.
Joint ownership won't work for me – are there any other options?
If you don't want to buy a property together, your parents could guarantee your mortgage or give you some money towards the deposit.
But there are other options.
Lending you some money. If you have sufficient income to manage home loan repayments but you don’t have enough money for a deposit, you might consider asking your parents to lend you some money. However, that some lenders won’t classify borrowed money as a legitimate deposit until it's been in your account for a few months.
“Gifting” you some money. If your mum and dad decide to give you some money as a gift, they can avoid the pitfalls of going guarantor on a loan. This can increase your borrowing capacity and help you buy the home you want.
Buying the property and then renting it out to you. Another option is for your parents to buy an investment property which you then rent from them. The downside here is that you’re still no closer to owning your own home, but if you can negotiate cheaper rent with your parents, you could be able to put more money aside each week to save for a deposit on your own property.
Frequently Asked Questions
There's a number of things to consider before you enter such a big agreement with your parents, including the financial implications and the consequences if one of your needs change the property needs to be sold. It's a good idea to get legal advice and to structure the agreement in the best way from a legal perspective, including clear guidelines and next steps if someone changes their mind.
Yes, you can use your parent's equity as a security or to use as part of your deposit to buy a house. This is generally done through a guarantor loan, where the equity in their home supports your loan.
Your parents can help you get a home loan by acting as a guarantor or providing financial assistance, such as gifting money for a deposit. If they gift you a deposit, the bank still want to see evidence of "genuine savings" to demonstrate you have developed good habits with managing money.
To use your parents as a guarantor, they will need to offer their home equity as security for your loan. This can help you secure a loan with a smaller deposit but carries risks for them if you default. You can speak to your bank or lender about the process of getting a guarantor loan.
Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University.
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I have permanent residency my parents are coming out on an 870 visa ( they are awaiting their 173/143 visa to be processed) can I help them buy a property as tenants in common 30:70 & how will that affect the stamp duty ?
Finder
SarahApril 7, 2022Finder
Hi Nickjac,
This is quite a complicated situation, and the answer depends on a number of factors including which state or territory you’re buying in, as each one has different rules around stamp duty rates and foreign owner rates. Your best bet is to call the Office of State Revenue in the state/territory you live in and call them for clear advice based on your specific circumstances.
All the best!
Sarah
KelvinMarch 28, 2022
My parents would like to buy a house for me from oversea. What documents and criteria required for them to be able to pay money directly to the seller? or they just need a contract?
Finder
RichardMarch 30, 2022Finder
Hi Kelvin,
Are your parents Australian residents or citizens? If not, buying a property in Australia will be a little more complicated. They will have to get approval from the Foreign Investment Review Board.
When buying a property in Australia, the first step is to sign the contract between the seller and the buyer. You should also engage a conveyancer to check the paperwork. Then a deposit is usually paid via bank transfer to the seller (or a trust account set up by the real estate agent). Then there is usually a period of 30 to 90 days before settlement, where ownership is officially transferred and the rest of the money is paid by the buyer (and the lender, if there is a loan).
If your parents wish to pay the full price for the property, then no lender or loan is involved. You could talk to the seller and their real estate agent to organise the money transfer at settlement. And you will definitely need a conveyancer.
I hope this helps.
Kind regards,
Richard
YvonneMarch 9, 2022
I am retired. If I become a co owner will I still get my pension?
Finder
RichardMarch 16, 2022Finder
Hi Yvonne,
Generally, your home is not counted as an asset when calculating pension or payment, but it does affect how your pension or payment is assessed under the assets test.
If you are a homeowner your asset value limit is lower than someone who does not own their residence. The asset value limit is the amount of assets a person can own before their pension or payment will reduce from the maximum rate under the assets test.
I hope this helps!
Cheers,
Richard
NatFebruary 4, 2022
You say “If you are buying a house with your parents, both you and your parents will be listed on the property title.”
What happens if you’re tenant in common with a mortgage, but you’re not on the title?
Finder
SarahMarch 9, 2022Finder
Hi Nat,
If your name is on the mortgage, but not the deed, this means that you are not an owner of the property. You are simply a co-signer on the mortgage and are obligated to pay the payments on the loan, but you don’t legally own a share of the property.
If you want your name added to the deed, you should speak with your co-signer on the mortgage and come to a decision. You can then work through the process of officially adding your name to the title. The regulations, fees and forms needed to transfer a deed or remove a name differ by state and territory. Visit our Property Title guide to check the links by state.
I hope this helps!
Cheers,
Sarah
MikeOctober 2, 2017
My parents are moving in to my home and selling theirs as need full time care. I have a big mortgage so what effects are their if they buy out my mortgage as co owners? We need to extend and renovate for them to live with me. If they do they will still have over a $1 m bank balance so pension may be affected?
ArnoldOctober 3, 2017
Hi Mike,
Thanks for your inquiry
If you’re co-buying a home with your parents, they would typically use the equity in their current home to improve your borrowing power and the cost of repaying the loan would be shared between the two of you. However, if either you or your parents fall behind on repayments, the other party is responsible for covering their share.
Before you enter into a co-ownership agreement, make sure you get advice from a solicitor or conveyancer. This will ensure that you know exactly what you’re getting yourself into and what you need to do to protect yourself from potential risk.
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I have permanent residency my parents are coming out on an 870 visa ( they are awaiting their 173/143 visa to be processed) can I help them buy a property as tenants in common 30:70 & how will that affect the stamp duty ?
Hi Nickjac,
This is quite a complicated situation, and the answer depends on a number of factors including which state or territory you’re buying in, as each one has different rules around stamp duty rates and foreign owner rates. Your best bet is to call the Office of State Revenue in the state/territory you live in and call them for clear advice based on your specific circumstances.
All the best!
Sarah
My parents would like to buy a house for me from oversea. What documents and criteria required for them to be able to pay money directly to the seller? or they just need a contract?
Hi Kelvin,
Are your parents Australian residents or citizens? If not, buying a property in Australia will be a little more complicated. They will have to get approval from the Foreign Investment Review Board.
When buying a property in Australia, the first step is to sign the contract between the seller and the buyer. You should also engage a conveyancer to check the paperwork. Then a deposit is usually paid via bank transfer to the seller (or a trust account set up by the real estate agent). Then there is usually a period of 30 to 90 days before settlement, where ownership is officially transferred and the rest of the money is paid by the buyer (and the lender, if there is a loan).
If your parents wish to pay the full price for the property, then no lender or loan is involved. You could talk to the seller and their real estate agent to organise the money transfer at settlement. And you will definitely need a conveyancer.
I hope this helps.
Kind regards,
Richard
I am retired. If I become a co owner will I still get my pension?
Hi Yvonne,
Generally, your home is not counted as an asset when calculating pension or payment, but it does affect how your pension or payment is assessed under the assets test.
If you are a homeowner your asset value limit is lower than someone who does not own their residence. The asset value limit is the amount of assets a person can own before their pension or payment will reduce from the maximum rate under the assets test.
I hope this helps!
Cheers,
Richard
You say “If you are buying a house with your parents, both you and your parents will be listed on the property title.”
What happens if you’re tenant in common with a mortgage, but you’re not on the title?
Hi Nat,
If your name is on the mortgage, but not the deed, this means that you are not an owner of the property. You are simply a co-signer on the mortgage and are obligated to pay the payments on the loan, but you don’t legally own a share of the property.
If you want your name added to the deed, you should speak with your co-signer on the mortgage and come to a decision. You can then work through the process of officially adding your name to the title. The regulations, fees and forms needed to transfer a deed or remove a name differ by state and territory. Visit our Property Title guide to check the links by state.
I hope this helps!
Cheers,
Sarah
My parents are moving in to my home and selling theirs as need full time care. I have a big mortgage so what effects are their if they buy out my mortgage as co owners? We need to extend and renovate for them to live with me. If they do they will still have over a $1 m bank balance so pension may be affected?
Hi Mike,
Thanks for your inquiry
If you’re co-buying a home with your parents, they would typically use the equity in their current home to improve your borrowing power and the cost of repaying the loan would be shared between the two of you. However, if either you or your parents fall behind on repayments, the other party is responsible for covering their share.
Before you enter into a co-ownership agreement, make sure you get advice from a solicitor or conveyancer. This will ensure that you know exactly what you’re getting yourself into and what you need to do to protect yourself from potential risk.
Hope this information helps
Cheers,
Arnold