As a parent, you want to do everything you can to give your children the best life.
And as they enter adulthood, for some parents, that includes helping them purchase their first home.
But how, exactly, do you go about helping your child purchase a home?
A recent article from realtor.com outlined tips and strategies to help parents that want to help their kids buy real estate, including:
- Give the down payment as a gift. One of the most common ways parents help their children purchase a home is by contributing to their down payment. As a parent, you have two options for helping your child with a down payment: you can loan them the money, or gift it to them. If you loan your kid the money, they’ll be on the hook for taxes. If you gift them the money (up to $16,000 per parent), the gift is considered tax-free.
- Be a co-owner with your kid… Some lenders will also allow you to buy a home with your child and set the equity however you’d like (for example, you own 60 percent, your child owns 40 percent), which dictates how much each party takes home if and when you sell the home. This can be a good option if the goal is to eventually sell the home to your child; that way, they can eventually become the full owners of the property—and you can get back your investment.
- …or buy a house on your own and rent it to your child. If your child doesn’t qualify for a mortgage (and if you have the funds to do so), you can also purchase a home on your own—and then rent it to your child. That gives them time to build up their credit and save for a down payment—and eventually, purchase a home on their own.