Building Equity & Long Term Investing
Helping with mortgage payments might make more financial sense than giving a child a monthly housing allowance or paying rent. Paying off a mortgage builds equity in the home and eventually turns into assets — usually appreciating assets.
Gifting the Down Payment
For tax purposes, parents often opt to gift the money to their children rather than paying the costs directly. The tax gift is $15,000 for each recipient and each taxpayer that year.
Potential Tax Savings for Parents
Parents who buy a home and allow their children to live in it might be able to take significant tax deductions. Property taxes, mortgage interest, repairs, maintenance and structural improvements are generally deductible on a second home.
Co-signing a loan
If your child cannot qualify for a large enough loan, an option is to co-sign their loan application. While this is an acceptable option with lenders, all parties of the loan are liable for the full indebtedness. Thus, if your child can’t pay – you will be responsible.
If your child is still several years away from purchasing a home, you both have time to plan ahead. Encouraging your child to save as much as possible now may minimize how much you may need to help him or her in the future.