Using Your Parents Home As Equity
Yes, it’s possible. But the money would be raised in your parents’ names, against their home, and it can have real knock-on effects for them (cost, risk, inheritance, and sometimes benefits). Your mortgage lender will also want the deposit to be clearly documented as a gift or a loan, because the treatment is different.
The main ways your parents could raise the funds
1) Standard remortgage (or further advance) in your parents’ names
This is usually the cheapest route if they meet affordability and age/term criteria.
- Monthly repayments required
- Lender will assess retirement income and outgoings
- Term may be shorter depending on age and policy
2) Retirement Interest-Only (RIO)
A middle ground where your parents pay the interest each month, and the capital is repaid when the property is sold (often on death or moving into long-term care).
- Monthly interest payments
- Can suit some retired borrowers where affordability works
3) Equity release (lifetime mortgage)
Typically no required monthly repayments (though some products allow voluntary payments). The balance rolls up and is repaid when the property is sold, usually on death or long-term care.
Equity release advice is a regulated area and should be handled by a properly qualified adviser.
Implications for your parents
This is the part to treat seriously.
- Their home becomes security for borrowing, even if the money is for your deposit
- Affordability and resilience: if it’s a standard/RIO mortgage, they must sustain payments long term
- Inheritance impact: equity release in particular can materially reduce the estate over time because interest compounds
- Early repayment charges: some products can be expensive to repay early
- Benefits and care funding: extra borrowing and cash balances can affect means-tested benefits, and equity release can interact with later care planning (get advice specific to their circumstances)
If they use an Equity Release Council-standard product, there are protections such as the no negative equity guarantee and “home for life” rights (subject to conditions).
Implications for you (the buyer)
From your perspective, the big question is whether the deposit is:
A gift
Most lenders are comfortable with gifted deposits from parents, but they’ll want:
- a gifted deposit declaration confirming it’s non-refundable, not repayable, and the donor won’t have an interest in the property
- source of funds evidence (bank statements showing where the money came from)
A loan
A family loan can be doable, but it tends to reduce lender choice because:
- it’s another commitment for you
- some lenders treat it as effectively increasing your indebtedness
- it can create legal complexity if the lender is worried about a “second interest” in the property
The biggest “watch out”
Even when the intention is generous, the risk sits with your parents.
If anything changes (your circumstances, their health, costs rising), they still have a mortgage secured on their home. That’s why the structure needs to work for them first, not just for the deposit.
What I’d do next
- Confirm how much you need for the deposit and what LTV you’re aiming for.
- Run a quick suitability check on the three routes above based on your parents’ age and income.
- Decide upfront: gift or loan (don’t leave this vague).
- If equity release might be in play, make sure you speak to a properly qualified equity release adviser.
- Speak to a broker early — we can line up the right lender approach for your mortgage and make sure the deposit documentation is acceptable before you commit.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 023 8235 2300 one of our consultants will then be able to help you find the right mortgage for your situation.
