The Three Risks To Keep In Mind Before Helping Your Kids Buy A Home

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As the housing market becomes more and more expensive, and the economy not helping the youth these days, it’s natural for parents to want to help their children have their own place to live. Parents are more often than not, paying at least the down payment when helping to purchase a home for their child.

Here are three pieces of advice I can give you, if you insist on financially contributing to your kid’s new home

1. You can’t help with the biggest affordability problem

You may think I will be rambling on and on about the down payment; but that’s not the issue. The problem I have in mind is the income needed to carry a mortgage, home upkeep, and the cost of raising kids and meet savings obligations. Incomes aren’t growing enough to keep up with rising house prices, and that’s why your kids can’t afford a house.

2. Don’t you need the money?

Longer lives mean you will need savings, especially to use some of it to care for your health during your retirement. Isn’t it better to save some money for your kids to inherit, once the inevitable happens?

3. You might not be thinking properly on the financial benefits of home ownership

If you want to help your kids buy a home because it’s an investment, you’re making an incorrect assessment that may not have any relevance to what’s ahead. Houses can’t keep rising in price at current rates and be accessible to anyone but upper income earners.

On a final thought, the simplest way to help your kids buy a home is the cash gift. Parental loans to a child are a different story, though; because when repayment begins, the interest is income to the parent that lent the money.