How do you share property income with your parents?

Where you are buying a property to rent out, then you should draft a deed of trust to distribute the income between the joint owners. You can optimise your net income by assigning the beneficial interest to the owners with the lowest tax bracket.

Buying property with elderly parents

When buying property with elderly parents you need to consider: Are they named on the title?. If they are then it is unlikely you'll get a high street mortgage because of the age restrictions. From 60 to 70 years you'll struggle to find a lender and even if they do lend the term will be under 10-15 years which mean the mortgage repayments will be higher. What happens when they die?. If they are named on the title then you need to buy out their share of the property and pay the money to their estate. This can be avoided if the property is held as Joint Tenants and or they state their intentions for the property in their will. Inheritance Tax. On death your elderly parent's equity in the property will be an asset they'll need to account for within their inheritance tax computation.

Can I put my child's name on my house deeds?

You can put your child's name on your house deeds using a transfer of equity. When asking questions like 'Can I make my daughter joint owner of my house?' you'll need to factor in the tax implications: You may have to pay capital gains tax on the full value of the share you assign, even if the transfer is for no consideration (no money changes hands). If you need to go into care, transferring the property to someone else may be considered 'deprivation of assets' and the transfer could be invalid. If you die within seven years of making the transfer, your child may have to pay inheritance tax on the value of the share of the property which was transferred to them. We can help with your transfer, or introduce you to an excellent accountant for tax advice. Get in touch to find out more. !form{11-popup Ask us a Question}form!

Is money taxable if parents gift me to buy a house?

You will have to pay inheritance tax (IHT) on a gift from your parents to buy a house, if it exceeds the tax free limit. Each parent can gift £3,000 per year, tax free and can roll over any unused allowance from the previous year, giving a total of £12,000 tax free, or £6,000 from a single parent. If your parent(s) gift you more than this limit, then you will be liable for IHT on the excess. If the parent who made the gift dies within 7 years of the gift, leaving an estate (including any gifts made in the past 7 years) worth more than £325,000, then the child will be liable for IHT up to 40% The tax implications of large gifts can be quite complex, if you have any questions, we can refer you to our hand selected panel accountant. !form{11-popup Ask us a Question}form!

There are tax implications for having your mum and dad named on the legal title and we explain how to get a shared mortgage with your mum and dad, how to save time and money during the process and what you need to do to protect the investment from future changes, such as new partners, death and divorce.

If you have any questions, please get in touch.

Buying a house jointly with parents

Q: What are the risks of buying a house jointly with parents?

There are risks involved when buying a property with someone else, even if they are family. Here are some of the risks and how you can stop them being an issue: Risk How to address it What happens when your parents want to get their name off the mortgage? Your parents may not want to be on the mortgage for a long time, so you should agree at the outset how long they'll be on the mortgage for. It is common to look to remortgage after the fixed term has expired. There is no guarantee this will happen, so to protect all the parties you can draft a deed of trust that includes a clause to set a deadline to remortgage. What happens if your circumstances change? With shared mortgages with parents, it doesn't matter whose circumstances have changed. No matter what, all parties to the mortgage are jointly liable to pay it. If one of the parties loses a job, has a pay reduction or hits financial hardship, the other parties need to pay the mortgage repayments. What happens if you get married? When the son or daughter get married, then the property could be at risk if they get divorced, because their partner may make claim to the property. The parents may be forced to sell. To avoid this, the parties could draft a deed of trust and the parents can sell their equity in the property to their child as a transfer of equity. Read more here - Do you pay tax on a transfer of equity? and Gifting Property to Children.

Created on:

29/11/2022

(Last Updated: 19/10/2023)

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 in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

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Buying a house jointly with parents

1. Buying with parents - on the mortgage and legal title

2. Buying with parents - Parents want money back

3. Buying with parents - On the mortgage, not on the title

What are the different types of shared mortgages with parents?

Joint buy to let mortgage with parents

Joint home purchase with parents

Gifted Deposit? Or is it a loan from your parent?

Joint Borrower Sole Proprietor Mortgage

What is a deed of trust on a property?

How can we help?

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