For the past hundred years or so, children have always ‘had it better’ than their adults had it at the same age. But when you look at the instability in the world right now, it’s clear to see that this isn’t necessarily the case anymore. And parents of young adult children have a lot on their plates – not just financially, but practically, too.
One of the perfect examples of this is the price of buying a home these days. The ratio between the average property price and average wage has never been bigger. Work hours are longer. And parents who want the best for their children will need to contribute a lot, in many different ways.
So, if you are wondering how best to help your child buy their first home, read on. We’ve pulled together a few ideas for you that should help you negotiate the major issues.
First of all, the best thing you can do with your kids is to help them understand the concepts of finances, mortgages, and interest from an early age. If you are new to this blog, please feel free to take a look around – we have hundreds of excellent advice for parents on teaching children about the value of money, and they can all help your child become financially literate and make better decisions.
Parents should always be involved in the planning stages when their kids want to buy a home. It’s especially true if you are – like many other parents these days – contributing some money towards it. So, go through their finances with them, and look at a mortgage calculator with down payment details to see if the home they love will be a viable purchase. Don’t forget, while mortgage calculation tools will give your child a rough guide of what they can afford, the lender they approach might feel differently about their finances. With this in mind, it might be worth helping your kids find a professional mortgage advisor who can work with them to find a home that fits them best.
There are various ways of helping your children out financially when they buy a home. You are allowed to gift them money each year, tax-free if below $14,000 (or $56,000 if both parents give to a child and their spouse), which a mortgage company will allow as a ‘gifted down payment.’ You can also offer a family loan – a sensible option if you want to teach your child a valuable lesson in lending and borrowing. This method means that your child gets a cheaper loan, while you can get your money out of a low-interest savings account and you could even charge your child slightly more to ensure you don’t lose any money. Finally, you can co-sign the mortgage. Using this method means you take away some of the financial obligations of buying the home – but bear in mind that you will then be under the lender’s microscope, too.
So, there you have it – any more tips to add? Feel free to let us now and join in on the conversation!