Buying a house with your parents

Mother helping her daughter talk to a mortgage broker.

Looking to join forces with your parents to buy your first property? Here’s everything you need to know.

With property prices so high in many cities the prospect of buying a home is a long way off for many young Australians.

But there is one way you can get the funding you need to afford to buy a home. By teaming up with your parents, you can make yourself a low-risk borrower in the eyes of the banks and supplement a small deposit or low income. Just make sure you’re fully aware of all the ins and outs of doing so before you decide to buy jointly with mum and dad.

Compare home loans for first home buyers

Rates last updated October 19th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.62%
$0
$350 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.57%
3.58%
$0
$0 p.a.
80%
Get a very low interest rate and pay fewer fees. Enjoy a fast online application process and add a 100% offset account for $10 a month.

Compare up to 4 providers

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Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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How can I buy a house with my parents?

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.

There are two ways you can buy a house in tandem with your parents: you can be tenants-in-common or joint tenants.

Tenants-in-common 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.

Under a joint tenancy arrangement, ownership of the property is split 50/50. If one joint tenant dies, their share of the property is automatically passed to the other joint tenant regardless of what their will says.

What are the pros and cons of joint property ownership?

Joint or co-ownership is not for everyone. For the right family it's a great idea but you need to weigh the benefits and potential downsides carefully.

Potential benefits

  • Break into the property market. In Australia’s expensive property market, co-buying with your parents may be the only way that some young Australians can realise their property ownership 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. Instead of buying a budget, entry-level property, you could buy the home you want to live in for the rest of your life.
  • Buy sooner. Rather than waiting years while you painstakingly save for a deposit, joining forces with your parents allows you to buy a home sooner rather than later.
  • Borrow less. By teaming up with your parents you are effectively borrowing less money than you would if you were out on your own, which means that you only have to manage smaller, more affordable repayments.
  • 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 any financial difficulty and fall behind on your repayments.

Potential disadvantages

  • Circumstances change. While you and your parents might be on the same page about buying a property now, will that still be the same in a few years’ time? As people’s lives change, so do their financial needs and goals. If, in five years’ time, you decide that you want to sell the property but your parents don’t, things can get messy.
  • 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 – not $250,000 each, as many people assume. So, if your parents’ financial circumstances change and they’re unable to make their mortgage repayments, you’ll need to manage the full loan repayments by yourself.
  • Your future borrowing power is reduced. Carrying on from the above point, banks will take into account your liability for the existing joint loan if you want to apply for financing in the future. For example, if you find a partner and decide to buy a house together, the loan you already share with your parents could significantly reduce your borrowing power.

Top tips for buying a house with your parents

While there are undoubtedly downsides that you should be aware of when co-buying with your parents, there are a few simple steps you can take to minimise the risk of any problems occurring:

  • 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 will ensure that there are procedures in place if there are ever any disagreements or if circumstances change. For example, it 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 with the details of what you would like to happen to your share of the property if you die.

Get in touch with a mortgage broker and get some professional advice

Joint ownership won't work for me - are there any other options?

If joint property ownership isn’t the right solution for you and your family, there are several other ways your parents can help you buy a house, such as:

  • Going guarantor. If your parents guarantee your home loan, they agree to assume responsibility for your mortgage if you default on your repayments. This means that if you get into financial trouble and are unable to repay your loan, your parents will be asked to pay out the loan in full, which could put their own home at risk. With this in mind, your parents might consider a limited guarantee, which means that they only have to guarantee part of the loan.
  • 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. This means that your parents can avoid the risks of going guarantor. However, be warned that some lenders won’t classify borrowed money as a legitimate deposit. A proper loan agreement should also be drawn up to prevent any problems from occurring.
  • “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, but your parents need to be certain that the money is in fact a gift and that they don’t want you to repay them some time in the future.
  • Buying the property and then renting it out to you. This is a common strategy and involves parents buying an investment property in a sought-after location, for example, an inner-city apartment, and then renting it out to their child. The downside to this is that you’re still no closer to owning your own home, but if you can negotiate cheaper rent with your parents, then you could be able to put more money aside each week to save for a deposit on your own property.
  • Buying a property in your name. The final option is for your parents to buy a property in your name or through a trust. This allows you to live in the home while your parents face the responsibility of paying off the loan. The downside to this is that when you become the owner of the property, either when your parents die or when they transfer ownership to you, your parents (or their estate) will face a Capital Gains Tax liability.

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Compare a range of home loans with family guarantor options in the table below

You can also click the blue tab to speak to a mortgage broker for free, expert help.

Rates last updated October 19th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
4.65%
5.02%
$0
$395 p.a.
95%
No application fee and 100% offset account. Refinance to this loan and you could get $1,500 cashback.
3.98%
5.13%
$600
$8 monthly ($96 p.a.)
95%
A fixed rate home loan with additional repayment options.
3.87%
3.89%
$0
$0 p.a.
95%
A low deposit mortgage for aspiring home owners. Fees are low and you can make extra repayments.
4.04%
5.05%
$600
$8 monthly ($96 p.a.)
95%
Fix in a competitive rate for three years.
4.08%
4.09%
$0
$0 p.a.
95%
Special Owner Occupier Rate. Free Offset Account.
4.64%
4.66%
$0
$0 p.a.
95%
New customers can score a discounted rate and access to a redraw facility.
4.48%
4.70%
$595
$0 p.a.
95%
Switch to this loan and get a $1,500 refinance cashback. Discount off the standard variable rate and no application fee.
4.33%
4.34%
$0
$0 p.a.
95%
A special investment rate and an offset account.
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.99%
4.86%
$595
$0 p.a.
95%
Split you home loan for free with one of the lowest fixed home loan rates.
3.99%
4.66%
$375
$15 monthly ($180 p.a.)
95%
A three year fixed rate loan with 100% offset account.
4.14%
4.33%
$0
$0 p.a.
95%
Borrow up to 95% LVR with no application fee and low ongoing fee.

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details below to receive an obligation-free quote from an Aussie home loans expert today

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the finder.com.au Privacy and Cookies Policy, Terms of Use, Disclaimer & Privacy Policy and the Aussie privacy policy.

Aussie Home Loans is both a lender and a mortgage broker, and offers a range of services.

  • FREE Suburb and Property Report with every appointment.
  • Access 3,000+ loans from over 20 lenders.
  • Get expert help with your loan application, including paperwork and eligibility.
  • Over 1000 brokers who are able to help you in your local area.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 5 years running (2013-2017)

Image: Shutterstock

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2 Responses

  1. Default Gravatar
    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?

    • Default Gravatar
      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.

      Hope this information helps

      Cheers,
      Arnold

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