Is there a right way to assist your child to purchase a home?

There is no “right” way to assist your child to purchase a home. However, there are smarter ways to do it. With the proper legal guidance and financial advice, you can take advantage of tax laws and work with property law to make sure that you and your investment is protected.

What can you do with gift assistance money?

Gift funds can be used for new or existing homes. Unused funds must be returned to the gift program. Assistance programs cannot be used to refinance a house or to make home improvements. Sellers cannot use the gift as a charitable contribution, but it may be deductible as a selling expense. Talk to a tax professional.

How to give a home to a child?

Purchase a home outright to give to a child. Enter into a shared equity agreement with the child. Give the child financial advice and guidance to get a loan on their own. Help make sure that the child doesn’t fall prey to bad deals or predatory lending.

How does the down payment gift Assistance Program work?

When the transaction closes, the down payment funds are wired from the gift assistance program to the closing agent. The seller has no part in the transfer of funds. Home sellers usually price their homes to include some room for negotiation.

What are the drawbacks of helping your child buy a home?

The upside is that with your combined incomes, you may be able to afford to take on a larger loan. The big drawback to this plan is the additional stamp duty rate. If you already own a property, then your child’s new home would count as a second home.

Can a parent give a child a down payment on a home?

Parent doesn’t have to enforce repayment of a loan. If a parent can give a down payment equal to 20% or help the child to pull that much together, the child will get a better rate and can avoid paying PMI. The cash gift can be an advance on a child’s inheritance, which will help them to avoid inheritance taxes.