It is becoming more common for multiple parties to buy a property. This is often done for sensible reasons, for example a sitting tenant who cannot afford the mortgage repayments on their own, but could with their children. The scenario you give is a perfect example of when the purchase by a child with the help of parents could be the right thing to do.
There are always pros and cons. Anyone who puts their name on the title to a property, and perhaps more significantly a mortgage, has to accept the responsibility that carries. From the property point of view, it means the responsibility to third parties as an owner and from the mortgage point of view it means they are responsible for the repayments in the event of a default by the other party.
The lender will see all parties as jointly responsible and would not be interested in apportioning repayments in the event of any problems. One of the main questions to ask with multiple-owned properties is: what are the tax implications on sale?
Assuming the parents do not live there, there could be a problem as there is an exemption for capital gains tax (CGT) only if a property is the principal or main residence of the taxpayer. If your client’s parents therefore have their own property, any gain in their interest in the value of their jointly-owned property with their daughter could be brought into account. This is definitely one to watch and advice is essential.
One solution, of course, would be for the parents to guarantee the mortgage, rather than be a party to the mortgage itself.
If that was acceptable to the lender, their names would not go on the title to the property and therefore any gain in the value would be fully exempt as the property would only be in the name of the daughter.
Edward Goldsmith
