5 TIPS FOR BORROWING MONEY FROM YOUR PARENTS TO BUY A HOUSE

5 TIPS FOR BORROWING MONEY FROM YOUR PARENTS TO BUY A HOUSE

5 TIPS FOR BORROWING MONEY FROM YOUR PARENTS TO BUY A HOUSE

Are you planning on borrowing money from your parents to buy a house?

Borrowing from the ‘Bank Of Mum and Dad‘ is becoming more and more common. According to the ‘Post Office’, one in six first time buyers are funding their home purchase by using a parental loan and I can officially say that I am one of them.

We have been saving up for a house for exactly one year now. The end of our journey is in sight and I am so excited. I can’t wait to jump off the renting wagon and to settle my family into a home that is ours. Despite saving long and hard, we really wouldn’t be where we are today without having some help from my parents. Something I will be eternally grateful for.

Borrowing money from your parents to buy a house can be tricky business though. Whether it is a gift or a loan, I can say first hand that money can cause a big shift in your relationship. Along our journey I have learnt several tips on how to do things the right way. If you’re planning on borrowing money from your parents to buy a house, or if you are a parent who wants to loan, or gift, your children money to buy a home, then there are some things you need to know before you do.

The ‘Post Office’ have kindly teamed up with me for this post. The Post Office Money and The Money Charity have actually created a ‘Bank of Mum & Dad‘ conversation guide that is well worth a read. With help from their guide and my own personal experience, I’ve put together some top tips that I really wanted to share with you:

5 Tips For Borrowing Money From Your Parents To Buy A House:

According to previous research conducted by the Post Office, 35% of first time buyers are receiving financial support to help them purchase their first home and get onto the property ladder. This support is coming in either the form of a gift or a loan. I have to say, that is quite a substantial figure, but actually quite unsurprising in todays climate.

5 Tips For Borrowing Money From Your Parents To Buy A House

So, if you’re planning on borrowing money from your parents to buy a house, the first thing you need to establish is whether it’s a gift or a loan.

1. Is It A Gift Or A Loan?

Both parties need to be clear from the offset about whether or not the money is a gift, or if they’re expecting repayment. If your parents are expecting repayment, then it’s so important to make sure that the repayment terms are made really clear.

From the word go, we agreed that my parents would ‘loan’ us the money, rather than gift. As we don’t yet have our mortgage and the money hasn’t yet been needed, we are still in the process of deciding on the repayment terms that we will, eventually, put into place.

According to Post Office Money, 16% of buyers enter a long-standing loan agreement with their parents but, only one in five millennial buyers actually agree a monthly repayment plan with parents. For me personally, I would feel much more comfortable with a plan in place.

At the moment we have only been able to forecast what we can pay back, based on potential numbers. But, the first thing we will be doing when our mortgage comes through, is coming to a set agreement with my family. But, you need to decide what works best for you and make your intentions clear for the word go.

2. Put yourself in their shoes

If you are borrowing money from your parents to buy a house, then a good idea for both parties is to ‘put yourself in their shoes’. When my Mum first suggested loaning us some money for a house, I initially hated the idea. I really didn’t want be a burden to my parents and I didn’t like the idea of taking their money and also feeling indebted to them.

The Post Office Guide suggested I put myself in my parents shoes. That’s exactly what I did. I realised that regardless of how I might feel, my parents really don’t like seeing their daughter wasting money on rent, when I could be investing that money in a property and my future. They also want to see me settled and want to make sure that I have security for myself and my daughter. Understanding each others point of views was really helpful in getting us to come to a decision. Which brings me to my next tip…

3. Communicate!

The most important tip to remember, when borrowing money from your parents to buy a house, is to communicate. One thing I was worried about at first, was my relationship with my family. Borrowing money can bring up some really strong feelings. For me, not only did I not like the idea of feeling indebted to my family, but at first I was really scared about the pressure of paying the money back. I also felt inadequate, because I had really wanted to save the money for myself and was trying really hard to do so.

Once we sat down and opened up to each other, all of my worries went away. But it’s not just initial talks that are important. Constant communication is key.

I soon discovered that my Mum had her own worries too. She was worried about how she would approach bringing up ‘repayments’ to me. She also felt a bit uneasy about depleting her savings and also worried about what would happen if something changed financially for her. This brings me into my next point…

4. Factor In For A Change In Circumstance

As this blog is called ‘Life Unexpected‘, it would be silly not to include factoring in for a change in circumstance. If life has taught me anything in the last five years, it’s that it can be pretty unexpected.

Five years ago I never expected to have my daughter. I also never expected I would become self-employed and land my dream job. There were also some negatives I didn’t expect either. Like the break down of a relationship and the struggle to buy a house because of my employment status.

Buying a house is a very long process and during that time circumstances may change. Something financially might happen to my parents, something might happen to us. As we’ve agreed to pay my Mum back, one thing we are having to factor in and talk about is; ‘what would happen if there was a change in circumstance’. What would happen if she lends me money and then she loses her job? Would I have to pay her back straight away? What happens if I suddenly get a pay rise? Would I be expected to increase my payments? This brings me to my final point…

5. Get outside advice

Getting outside advice and even considering a formalised legal agreement is really wise. Even if you have the best relationship with your parents, talking about money isn’t always easy and things can change down the line. Getting advice from somebody else, or speaking to a solicitor can make both parties feel a lot more comfortable.

According to the Post Office, the majority of parents do not formalise an agreement with their house buying children, which I find crazy. But, failing to provide a deed of gift or letter of intent could actually put them at risk legally.

Our House Buying Journey So Far

Over the next couple of weeks, we will be taking our house buying to the next level. We are in the process of applying for a mortgage and are seeking outside advise in regards to the loan my parents are kindly giving us.

Over the coming months, we’ll be sharing a lot more of our house buying journey with you. From tips to save money for a deposit quickly, to things we’ve learnt on our house buying journey so far. Fingers crossed we’ll also be able to show you our very first home, by the end of the year!

Are you saving or looking to buy a house at the moment? Are you planning on borrowing money from your parents to buy a house, or is this something you’ve already done? Let me know in the comments below.

*Collaborative

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78 Comments

  1. March 20, 2018 / 7:24 pm

    Sadly my parents won’t ever be in a position whereby they are able to loan us money to go towards a house however these are really sensible tips for those who can borrow from the bank of mum and dad 🙂

  2. March 20, 2018 / 8:40 pm

    Buying a house is such an exciting moment and one that can be long awaited! I look forward to following your journey 🙂

  3. March 21, 2018 / 6:57 am

    Great advice. Thankfully we haven’t needed to do this, but it’s definitely a good idea to get on the ladder

  4. March 21, 2018 / 8:30 am

    This is happening here at the moment. My daughter is in the process of buying a house and she has already asked to borrow some money

  5. fashionandstylepolice
    March 21, 2018 / 8:47 am

    We bought our first house 5 years ago. We did it ourselves with no help from anyone for except furniture gifts. It was tough though. If we did borrow from our parents, we would have definitely sought advice like this.

  6. mammasschool
    March 21, 2018 / 9:27 am

    This is great advice and having been through this with the help of both sets of parents during our move to Sweden, the tips are very sound

  7. March 21, 2018 / 9:48 am

    My parents have helped us twice over the years. The first time was to help us move to the UK. And the second was last year to help us move to Portugal. They gave us a loan so we could sort a place to live while we waited until our UK houses sold. The money is back in the bank ready to be repaid but they’ve said to wait and if we need it towards a deposit for a mortgage here we can use it. They’ve been incredibly generous. I love these tips. Communication really is key.

  8. March 21, 2018 / 9:58 am

    These are great tips and as someone who has been there I agree that communication is absolutely vital!

  9. March 21, 2018 / 11:17 am

    Great post and tips. I wish my Mum and Dad could have helped us out when we brought our first house. It is a great idea to get thing wrote down at first so everyone is clear 🙂

  10. countryheartdeb
    March 21, 2018 / 3:53 pm

    Great advice. Communicating well really is important. Good luck with your journey up the housing ladder!

  11. March 22, 2018 / 3:49 pm

    Good luck with everything – we bought our first house and I had no idea what I was doing, I wish I’d been wiser! I also wish I could borrow from my parents 😉

  12. March 22, 2018 / 4:56 pm

    We bought our house 5 years ago, with no help, but we were lucky in that house prices hadn’t yet shot up again, and we also live north East, so house prices aren’t silly money.
    Great tips for something that I think is becoming ever more needed for people to get onto the housing ladder.

  13. March 22, 2018 / 10:26 pm

    Oh good luck with your mortgage application and I hope you find a lovely property to buy. These are great tips for anyone borrowing money from their parents.

  14. April 9, 2018 / 11:05 am

    Brilliant tips Chloe as always. This is how I got on the property ladder 15 years ago. I could never have afforded it without my folks.

  15. April 9, 2018 / 11:22 am

    My family gifted me money to buy my first house on my own after separating with the boyfriend I was living with and I couldn’t have done it without them. I think it’s important for people to know too that if the money is a gift, then should the person who gave it pass away with 7 years, that money would be subject to tax. Not a nice thought, but it definitely needs to be considered. Best of luck with your house purchase!xx

  16. April 9, 2018 / 11:22 am

    Some really handy tips for handling this conversation! There’s no way we’ll be able to buy a house without help from both sets of parents so this is really relevant for us. We are just really fortunate that they can help, otherwise we’d be renting forever!

  17. steph
    April 9, 2018 / 11:24 am

    I hope that your house move goes well. It can be so hard borrowing from family, but your tips are fab. Such a good post. x

  18. April 9, 2018 / 11:27 am

    This is so interesting, thank you for sharing! We’re chrrently renting and will definitely need help to be able to buy – especially as we live in an expensive area. These are fab tips for when the time comes! x

  19. April 9, 2018 / 11:27 am

    We had some tricky financial times a few years ago when we started our business, we had to sell our house and find somewhere rented instead. Because our credit history was terrible (the business meant we had lots of unpaid payments on our mortgage when we were struggling), the estate agents wanted 6 months rent up front rather than monthly and so we had to ask the bank of mum and dad! Fortunately they were able to help us but I’m not sure where we’d be without their help. LIfe is better now, we’re still renting and still having to pay our rent in 6 mth chunks but no longer needing to ask my parents! Good luck with your journey onto the properly ladder 🙂

  20. April 9, 2018 / 11:32 am

    Great advice! Unfortunately my parents aren’t in a position to do this for us but I think its a great option if parents can help! Good luck with buying your new home!

  21. April 9, 2018 / 11:33 am

    My husband and I had financial help when buying our first home. There was no way we could do it without them. These are some really helpful tips!

  22. April 9, 2018 / 11:36 am

    Some great tips here. We have had help from my partners parents when we bought our first house and also with the fees with trying to move now. Buying/selling/moving is such a stressful task in itself that any help from family/friends makes such a difference.

  23. April 9, 2018 / 11:38 am

    These are very good tips, I think so many people are walking in these shoes!

  24. OurAlteredLife
    April 9, 2018 / 11:41 am

    Great advice and something more and more people will need to read I think.

  25. April 9, 2018 / 11:43 am

    This is super helpful. I’m expecting to have this conversation with my own daughter in the next few years (she’s almost 18) so will forward it on 🙂 Lisa

  26. April 9, 2018 / 11:43 am

    Great advice, I’ve had to borrow money from my Mum from time to time, just short term cash flow issues but luckily she has been in a good position to lend and I always pay her back with a bit of interest and a lot of brews

  27. April 9, 2018 / 11:46 am

    I think it’s important to remember that you should really get a letter to say your parents are gifting or loaning the money as deposits over a certain amount there needs to be proof of where it came from. Also when you apply for your mortgage don’t forget to include the repayments to your parents in your outgoings as it will effect things for your mortgage as it will be a pre existing debt.
    http://www.allthingskerri.co.uk

  28. April 9, 2018 / 11:48 am

    We borrowed money and received money as a gift from parents to buy our first house. We had a monthly repayment plan in place but we’re lucky enough to be able to pay back the loaned money with the equity from our sale when we moved! Great advice 😊

  29. April 9, 2018 / 11:50 am

    Such great tips . Means everything is clear cut and you still have a good relationship . My parents would never be in a position to help but they often talk of wishing they could. There are 7 of us !!! This is definitely needed when receiving help from any family or close friends with money involved . Love it x

  30. April 9, 2018 / 11:51 am

    We’ve been very lucky in that both my parents and my husbands parents were able to lend us money to get on the property ladder. We put most towards the fees eg solicitors and all the fees that they then need to pay, surveys and so on. We couldn’t have done it without them so we are super lucky! We are always so greatful. I found it interesting that when we were at our bank, they asked if we could get £5000 off anyone so we could increase our deposit to the next bracket to lower our interest rate. No way could I go to anyone and ask for £5000, it’s a crazy amount.
    Lovely post and great tips.

  31. April 9, 2018 / 11:54 am

    There is some brilliant advice here. I think the key thing is to make sure from the start that everyone knows exactly where they stand and that everything is completely clear with what is being agreed. I’m honestly a bit surprised that it’s only 35% of first time buyers that are getting extra financial support at the moment, I really would have thought it would be more than that these days! Best of luck with your mortgage applications and everything, hope it all goes smoothly! x

  32. April 9, 2018 / 11:55 am

    Buying a house is stressful and any help is good. I’m sure most parents are happy that they can help their kids climb the property ladder.

  33. April 9, 2018 / 11:56 am

    My parents weren’t able to help us, but we are definitely aiming to be able to help our children

  34. April 9, 2018 / 11:57 am

    We were lucky enough to be gifted our deposit for our house from parents. It’s so hard if you are renting and saving at the same time. Good luck with your journey

  35. April 9, 2018 / 12:00 pm

    Great post! I don’t know what I’d do without my parents! Whilst they’re not in a position to lend me money towards a house, they have helped me out with buying cars. Good luck with buying your perfect house

  36. April 9, 2018 / 12:00 pm

    I think the most important thing is communication. All parties have to be clear if it’s a gift or a loan from the get-go otherwise it will only cause problems later on. We were lucky with our first house as husband had inherited enough from his grandparents to afford a decent deposit. Otherwise I think we would’ve been a bit stuffed!

    Good luck with your mortgage application and house move!

    • April 9, 2018 / 12:46 pm

      This is brilliant. Sadly, neither my parents or in-laws would be in a position to ever lend us the money to buy a house, but this is still good practise for if we need to borrow money for other situations (ie, new car! Which we have done with the in laws.) I agree, communication is key! Great post 🙂 x

  37. April 9, 2018 / 12:01 pm

    Something I think so many young couples have to do now as the property market is getting so much harder, and banks less likely to lend money

  38. Kate
    April 9, 2018 / 12:03 pm

    Some really great tips here. Borrowing money can be fraught with potential problems but this will help you to avoid them as much as possible!

  39. April 9, 2018 / 12:03 pm

    Great advice, I’m currently borrowing off the Bank of Mum and Dad to get our house valued!! They’ve always helped us and their response is one I will be the one having to look after them xxx

  40. April 9, 2018 / 12:04 pm

    I think they only way we’d be able to buy a house would be if we could be loaned a deposit. These are some great things to bare in mind if it ever happens for us! Xx

  41. April 9, 2018 / 12:11 pm

    Good luck buying your house. I envy you, we have been in a renting rut for eternity (or so it seems) we do our best to save but there is always something that gets in the way and the only hope we have is the bank of mum and dad. The problem is that bank doesn’t have the funds in anyway to entertain that idea. Your Mum is very kind and I can see what she wants to help you. If my daughters are in the same position I really hope I will be able to help them.

  42. April 9, 2018 / 12:12 pm

    It’s so hard buying a home now. I was lucky enough to buy at a time where 100% mortgages were still a thing and both me and my husband made a bit on our first houses to enable us to buy our first home together. I really hope we’ll be in a position to help our girls buy their first homes too. Being clear in what you’re lending is really important, especially if they buy with a partner and later separate!

  43. April 9, 2018 / 12:13 pm

    We were very lucky that when we bought our house ten years ago my parents gifted us money that had been left to them from my grandfather. Otherwise we would still be renting now. Renting and trying to save is so hard, especially if you have little ones too. Fab post! X

  44. April 9, 2018 / 12:17 pm

    I’m self employed and as my income varies so much I don’t think a mortgage is on the agenda anytime soon. Good luck with getting your home 🙂 x

  45. Leanne
    April 9, 2018 / 12:18 pm

    Great advice! I’m not lucky enough to have parents who can provide a loan but I would love to either gift or loan my children money when they’re older so I’ll bear the advice in mind and check out the guide too

  46. April 9, 2018 / 12:24 pm

    Fab tips we had to do this but unfortunately we didn’t end up buying 😭 nightmare!!

  47. April 9, 2018 / 12:25 pm

    Great advise. I’m sure it will help loads of people going through currently and it’s great to set up guidelines etc before you borrow from mum and dad.

  48. April 9, 2018 / 12:26 pm

    Oh I know what this is like. We borrowed from my in laws to make up the rest of our deposit. It was wonderful they offered but then my father in law got solicitors involved to draw everything up and it caused bad feelings. I mean, it wasn’t like we were running off with the money! It was a lot of hassle but we’ve now been here for 7 years and we couldn’t have done it alone.

  49. April 9, 2018 / 12:27 pm

    We were in a lucky if bittersweet position where my husband inherited his parents house when they passed away, but these are some really great tips! X

  50. April 9, 2018 / 12:29 pm

    SUCh useful information! We really want to get on the property ladder in the next couple of years but know we certainly won’t be able to afford it all on our own! I have thought about speaking to my parents about this and I feel a lot clearer on it all now! x

  51. April 9, 2018 / 12:31 pm

    I’d be really uncomfortable borrowing such a massive amount from my parents. I think you’d need something contractual put in place. Great post.

  52. April 9, 2018 / 12:39 pm

    Really sensible advice. Managing things with the family when there are siblings. It’s easy for resentment to creep in if one child gets a lot of financial help and the other doesn’t.

    Good luck with your house purchase!

  53. April 9, 2018 / 12:43 pm

    I love this! Really great info! As a mum and money blogger myself, I think it’s important to teach your kids to save but be there to back them up if they need it.

  54. aimz18
    April 9, 2018 / 12:48 pm

    We borrowed from our parents and have been paying them back for the last 8 years now. No arguements so far or problems of any kind

  55. April 9, 2018 / 12:49 pm

    Fantastic tips!

  56. April 9, 2018 / 12:49 pm

    This is a really good post, the key is communication. Most parents do want to help, obviously depending on their financial situation how much. They helped me so much, and the key was being open with them.

  57. April 9, 2018 / 12:51 pm

    This is such helpful advice. The financial climate is horrific for younger people and needing to go back to family as a resource is pretty depressing.
    Hopefully these guidelines will make things easier.

  58. April 9, 2018 / 12:58 pm

    THIs is great advice! We had to borrow some money and also we were gifted some from parents, in order for us to buy our first house. I wish I’d read this before!

  59. April 9, 2018 / 1:01 pm

    This is the only way we will ever be able to afford to buy! Some brilliant tips, thank you 🙂

  60. April 9, 2018 / 1:17 pm

    Currently going through the same thing, fingers crossed we can find a house now.

    Fab post xx

  61. April 9, 2018 / 1:21 pm

    Some great advice… I don’t think I could ask my parents though, haha!

  62. April 9, 2018 / 1:56 pm

    Really good advice! It is so hard to get on the property ladder these days and we are still working towards it. Thank you sharing these tips!

  63. April 9, 2018 / 2:24 pm

    Such a helpful post! All the best with getting on the property ladder!

  64. Nik
    April 9, 2018 / 2:34 pm

    Sadly I had to ask for help from my parents but they said that they would rather me use my inheritance now whilst they can still see me happy and settled 😁

  65. April 9, 2018 / 2:50 pm

    Great post with out my in-laws we would never have been able to afford to get on the property ladder!

  66. April 9, 2018 / 3:35 pm

    These are great tips. I really think communication is one of the most important things in this situation. Like most people I know, we were given money from both my parents and my in laws. But the thing I think is really important is that you make sure that you understand the complexities of the relationship history if you are borrowing money from in laws. With both sides in our case, the money was a gift, rather than a loan, but although my parents were no-strings attached, it became clear that for my in laws they felt that they had ‘bought’ something – that they had input on our decorating and renovation decisions, and that later on, that it should have ‘bought’ them ‘access’ to grandchildren. Ultimately it’s been the cause of a breakdown in our relationship, and had I known that they had history for this kind of ‘strings attached’ gift, I would never have accepted in the first place.

  67. April 9, 2018 / 3:39 pm

    Great tips! It’s so difficult now, my mortgage over a decade ago was thanks to a (sadly unexpected) inheritance, and I certainly couldn’t have done it without! There were also self cert mortgages, which sadly no longer exist.

  68. April 9, 2018 / 4:10 pm

    Fantastic tips! When we were saving for our first house we were lucky to live with parents for two years to save enough without renting. Getting on the property ladder is so hard nowadays – especially here in Cornwall where the wages and house prices don’t seem to add up! Good luck with your house buying. x

  69. April 9, 2018 / 6:59 pm

    Fantastic tips! We’ve sadly never had help from our parents but I’ll definitely be helping my children x

  70. April 9, 2018 / 7:02 pm

    We’re currently renting and saving to buy. My mother In law is contributing to our house fund with at least 7k which I’m so humbled by. She isn’t asking for it back, but it’s amazing to have such lovely support through family isn’t it x

  71. April 9, 2018 / 8:06 pm

    Great tips, we borrowed money from my mother in law when we first purchased our house…18 years ago…wow how did I get that old! Without that we wouldn’t have got on the property ladder and wouldn’t have our house now. We were lucky at the time that our house doubled it’s worth in a few years so when we sold we paid her back out of the equity. Good luck with your house buy x

  72. April 10, 2018 / 8:35 am

    These are great tips. We didn’t borrow from our parents to get on the ladder but my Dad helped us massively with renovating both our flat and then our next house. We would still be living in a wreck without his financial support. I’m hoping I can do the same for my girls later down the line.

  73. Ezinma
    April 11, 2018 / 1:41 am

    This is so enlightening. Thanks for sharing

  74. April 11, 2018 / 11:02 am

    Great post!! So many people are in this same situation! X

  75. April 12, 2018 / 11:34 pm

    I had help for a deposit for my first flat from my parents but agreed terms which included me lying back every penny and interest so agree to get that sorted up front!

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