Help Grown Kids Become Homeowners
Jul 30, 2018
As with any financial arrangement, don’t forget to set the ground rules.
Here’s what Heckman suggests parents do:
– Consider disclosing the assistance to all immediate family
– Consider treating all siblings equally
– Use contracts
– Document gifts
According to San Francisco real estate attorney Andy Sirkin, formal agreements can offer important benefits,
“They define obligations and minimize misunderstandings. And if parent lenders die or become incapacitated, all their heirs can view the transaction and its history.”
Ways to help
Here are three ways parents can help make it more affordable for new home buyers to purchase a home:
1. Give money
A gift of money is often best, Heckman says. Parents can write a check for any amount they choose.
That’s it — no contract or ongoing commitments. Or they can pay all or part of an expense such as mortgage closing costs.
Providing down payment assistance can help new borrowers avoid paying for private mortgage insurance, which helps keep their monthly payment low.
2. Finance the mortgage
Parents with cash to invest can become the mortgage lender, offering extra-easy terms, like no closing costs or no down payment.
Heckman says they can charge a higher rate of interest on their money than it earns in a savings or money market account and still
offer kids a lower-than-market mortgage rate.
3. Co-borrow
Although riskier for parents, co-borrowing is another option. Mortgages with co-borrowers were nearly a quarter of all
new-purchase mortgages in the third quarter of 2017, according to ATTOM Data Solutions, a real estate data company.
The article 3 Ways Parents Can Help Grown Kids Own a Home originally appeared on NerdWallet.
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