For first-time buyers, it can be difficult to enter a booming real estate market and compete against established homeowners. Often, it’s simply getting into the market that’s the hard part. But a little help can make a big difference. That’s why those who can afford to will frequently help their adult children purchase their first property. Here are a few ways that parents can help make homeownership a possibility for their children.
Cash Gift
For tax purposes, cash gifts are a popular method for parents to help adult children with a down payment. In 2020, for example, each parent could gift a child up to $15,000 without having to pay a gift tax and could give an equal amount to the child’s spouse, as well. This is a generous way to get them on the path to homeownership, and will allow you to take a step back from the process once you’ve helped with the down payment.
Give a Loan
If you’re not convinced that a cash gift is the best route, another option is to essentially function as a lender and give a loan. This can be set up with monthly terms and statements to make it official and ensure that your child holds up their end of the bargain.
Co-Sign a Mortgage
If they have the down payment, cash reserves and steady income, but are still having trouble qualifying for a mortgage, then they might best benefit from a co-signer. While this won’t necessarily require you to provide your child with finances, it does put you on the hook for the extent of the mortgage.
Buy It Outright
Lastly, you can always buy the property with the intention that your child will own it in the future. Whether you choose to gift it to them or function as their landlord with a rent-to-own payment plan, there are several options afforded by simply buying it in your own name.
