When you and your spouse are expecting a child, you probably invest in a new house or build a nursery above the garage. After the birth of the child, you’re pretty much off the hook when it comes to your children’s real estate or are you? Well, as they grow up, go to college, and start a family of their own, a time comes when your kids prepare to buy their first home.
Hopefully, they are old and mature enough to bring this decision on their own but a little help on your side would not hurt. You can loan them money, provide them with contacts in the real estate business or simply give them advice on the purchase. Your kids might be all grown up but they can still use some guidance from their parents, at least when it comes to buying their first home.
1. Giving money away
We live in a world where the phrase “give me some money” is heard way too often in parent-child communication. Although giving them money without asking any question when they are teenagers is outright wrong, a monetary injection is quite welcoming when your kids become adults. Namely, they are wise enough to use the money in the right way so your “investment” will be safe. In fact, if the whole family pitches in with a sum of 10.000 dollars, your kids will have a nice budget, to begin with.
2. Helping out with the loan
Apart from directly giving money to them, you can help your kids by taking part in the load they take out. When deciding on the loan, the bank will take multiple factors into consideration, from your kids’ pay to their debt-to-income ratio.
If you decide to help them out with the loan, either as an endorser or a creditor, the credit bureau will interpret this as a positive sign. Now that the people from the bank know you are standing by your children, they are more likely to grant them a better payment plan with more favorable interest rates.
3. You want to help but can you help?
Ever since you were helping them learn their first steps, you were there to help your children. Not much has changes of the past few decades but as you grow older by the day, the question arises, can you help? It is not a question of whether you want to but are you in a financial position to do so.
Namely, even you give them money, it is highly likely that this gift will be taxed so you need to be prepared for this extra cost. Furthermore, helping out with a loan is a huge commitment for the future as bank loans are given out to 30 years on average. This is a long period that you need to be able to pay each month so you’ll need to get some sort of insurance. (See also: 8 Easy & Inexpensive Ways to Decorate Your Home)
4. Help with the downpayment
Even if you have enough money to purchase real estate for your children, you can still waste this money unless you invest it wisely. Namely, millennials have a tough time coming up with the money for a downpayment so this is the stage of purchasing a home that they require help the most.
In fact, the reason why your young motivated kid is still living in the family home is that they cannot afford to make the downpayment for a property they like.
Your child is really not to blame because of this. In America alone, people are drowning in 1.5 trillion dollars of student loan debt that their parents are helping them pay. Because of the state of the world economy, many graduates find it tough to secure a well-paid job which contributes to their inability to save enough money for a downpayment for their dream home or any home, for that matter.
5. A pat on the shoulder
Even if you are well off and in the position to splash a huge sum of money to your kids, this is not a cash-only transaction. Namely, they can earn the money, loan it, and even win it as a prize in a competition but what they really need from you is supportiveness.
You’ve bought your first real state decades ago and now they are getting ready to make the same step, your children want to know that you are there for them. In some cases, they might not even think of asking you for money, as all they want is for someone whose opinion they value to say they are making the right move. Luckily, a pat on the shoulder is often the only thing you should do, as your kids are self.-dependent people whom you are proud of.
6. Real estate acrobatics
Finally, the current market trends are forcing people to come up with innovative ways to secure their pieces of heaven on Earth. Namely, if you are still living in the home you raised your children in, you can offer them this piece of real estate to get a better deal.
The number of possibilities is endless. You can move out and get a smaller housing unit, the kids can then sell the family home and get enough money for a place of their own. Another option is for the children to move back into the larger family home, only purchasing a smaller apartment for their parents, i.e. you and your spouse.
If your family owns a plot of land, either in the city or in the countryside, you can use it to build a home from scratch. As an alternative, you can sell the land and use the money to buy a more desirable piece of real estate.
In the end, there is even the option to sell the old family home to an investor who will give a couple of apartments. Whichever scenario you decide on in the end, be sure to offer the real estate you already own to your children if neither of you has enough cash to buy a new home.
We have no doubt that you want your kids to buy their first home. However, there is more than one way in which you can help them achieve this so weigh your options carefully.
About The Author:
Sarah Jessica Smith is a young blogger from Sydney. As a real estate and home design enthusiast, she works as a consultant for Statesman Homes, the best advisers for first home buyers in Adelaide. She is in love with life and all the things that can make her daily routine easier. She loves to write about home improvement, lifestyle, and all the small things that make life such a great adventure.