Buying a house with your parents? How it works

You can buy a home with anyone–siblings, parents, extended family, or even friends.

With high property prices across the country and the rising cost of living, many young borrowers get help from their parents to buy a home.

Our 2021 Bank of Mum and Dad report found that the average parental contribution to a child’s home deposit is at $70,000 with an overall contribution of about $134,200. 

But did you know that instead of getting gift money from your parents, you can buy a home jointly?

By teaming up with your folks you might be able to get a foot in the property market sooner rather than later. For example, your parents could add to your deposit or maybe use the equity from their home to help you cover the costs.

When buying a home with someone else, you should also decide the ownership structure so you can figure out your finances. After all, both you and your parents will be responsible for repaying the home loan. That includes covering the other’s share if one of you falls behind on repayments.

Ownership structure

Just because you’re co-owning your home with your folks doesn’t mean everyone will have an equal share of the property. That’s why it’s important to figure out what sort of ownership structure you’ll have.

Joint tenancy

In a joint tenancy, everyone on the property title has an equal share of the property and if someone dies, the surviving members absorb full ownership of that person’s share. This ownership structure might seem like the most ideal or fair but it could complicate things if someone decides to go their separate way. Also, you don’t have the right to sell or transfer individual ownership because you all own the property as a group.

Tenancy in Common

This is a more flexible form of co-ownership because it allows two or more people to have a share of a property. For example, those in the deed can have an equal share of the property or varying shares, like 80-20. Also, if later down the line someone (let’s say your parents) wants to exit the arrangement, it makes it easier to sell their part of the property.

Joint ownership is quite common in the property market world, but remember the more people involved the more problems you may face. So make sure to weigh up the pros and cons carefully before committing to buying with your parents.

If you don’t like the idea of co-owning with your parents, there are other ways they can help you to purchase a property. Here are a few below.

Consider getting a guarantor

A guarantor uses their existing property as security for part or all of your loan. The guarantors don’t have to cover the full amount of your loan: they could cover 20% of your property price, for example, which removes the need to take out lenders' mortgage insurance. They also agree to take responsibility for your mortgage if you default on your repayments. 

When looking for a guarantor, consider someone close to you. Typically lenders only allow immediate family members to act as guarantors.

Gifting you some money for a deposit

Parents who gift their kids money for property give an average of $70,000, according to Mozo’s Bank of Mum and Dad report. Being gifted this money can increase your borrowing power and help you buy your dream home.

Buying property under your name

This option might not be for everyone, but about 11% of parents purchased property on their kids’ behalf. This allows you to live in the home while your parents are responsible for paying off the loan. 

If you’re looking to buy property soon, make sure you’re getting a good deal from a bank or lender. Don’t forget to compare home loan costs and features with a few of the options below.