The real estate market's a tough place for first-time buyers.
Young homebuyers often lack the savings for a down payment and tougher lending
criteria means that some cannot qualify for a mortgage. Traditionally parents
have helped their children mount the property ladder by giving them cash for a
down payment. If cash is in short supply, other options include co-signing a
home loan or arranging a lease-to-own scenario.
With the Down Payment
The simplest way you can help your kids financially is by giving them cash to
increase their down payment. A bigger down payment typically means lower
interest rates, more deals to choose from and a more lenient lending criteria.
Aim for a deposit of at least 20 percent of the home's value. If you're giving
your child down payment money, plan on losing that money and not getting it
back. Lenders prefer the money to be a gift, because if the parents treat the
cash as a loan, it is considered a second mortgage on the property. Keep your
dollar advance below the annual gift tax exemption limit, and you shouldn't run
into any tax problems. Buy
the Home as an Investment and Have the Kids Pay Rent
Parents own the real estate, which they can sell to their children when their
ready, keep as an investment, or sell to someone else. Do the sums before you
consider this option. If you need a mortgage, you'll have to come up with a
larger down payment than you would for your primary home, typically 30 percent.
Like any landlord, you'll have to pay the mortgage regardless of whether your
tenant pays the monthly rent. Moreover, this approach may be great for you but
it doesn't do much for your kids. They don't get a stake in the house and
they're not really building up any responsibility. Lease-to-Own
A lease-to-own arrangement is also known as a land contract or purchase
installment contract. Under this arrangement, you essentially act as your
child's mortgagee. You buy the home and give your child immediate possession,
and he or she pays you the purchase price in agreed installments. When they've
paid you back in full, the home is theirs. A lease-to-own arrangement requires
specialist tax advice and must include a written contract. Co-Sign
If your child has a low income, low credit score or a poor credit history,
co-signing their mortgage may get them past otherwise prohibitive lending
criteria. This isn't for everyone though. If your child doesn't make his or her
mortgage repayments, the bank will come to you. You'll have to be able to
afford any outstanding mortgage on your own home, as well as your child's
mortgage payments if they can't or won't pay. Making good your child's
delinquency may have a devastating effect on your credit and cash flow, so if
your child cannot get a loan in his or her own right, ask yourself why before
you agree to co-sign the loan. If they're in a starter job and simply haven't
had the time or the income to establish a credit profile, they may be worth the
risk. If they can't get a loan because they have a history of credit card
defaults and late bill payments, the chances are they'll default on this loan
Two or more incomes increases your child's buying power, but you take on 100
percent liability for the loan. If he or she misses a payment, the lender may
ask you to make good the default. There may be tax implications too, especially
if the property isn't your main home. On the plus side, you'll both own a stake
in the house. You can agree to split any capital appreciation in whatever
percentage you choose, if the home is later sold.
We understand that for many people, buying or selling a home is probably the largest investment decision that they will make in their lifetime. Halo Group Realty LLC thus became active in selling Real Estate in 2008 and was setup to make this process a simple and painless transaction. Your dedicated agent will guide you every step of the way to make purchasing or selling your home enjoyable and exciting… as it should be!
Today, Halo Group Realty LLC is at the cutting edge of technology in offering assistance to those in need of real estate services, and we have revolutionized the method of delivering education to consumers. Halo is established as the place for consumers to get the knowledge and assistance they deserve in the process of facilitating the Real Estate transaction, positioning you in the best possible situation to get the best price when you either to buy or sell. With leadership, innovation and forward thinking, Halo Group Realty, LLC is poised to make a huge impression in the real estate market while providing clients the keys to home ownership.
Our goal is to help make your dream a reality and take away all of the stress that goes along with purchasing or selling your home. Whether you are purchasing new construction, an existing home, or just an open space for future enjoyment, representation by a Halo agent is a valuable tool in making your dream become a reality.