How to Help Your Children Buy a Home

Options range from family loans to outright gifts.

- EMMA PATCH

Lofty home prices, rising mortgage rates and tight inventory of homes for sale have shut many young buyers out of the housing market. In 2022, the median age of home buyers was 53, the highest on record, according to a survey from the National Association of Realtors-which means first-time buyers are delaying their purchases. The typical first-time buyer was 36, also an all-time high.

With that in mind, parents (and grandparents) of would-be home buyers are often interested in helping out. Options include co-signing a mortgage, jointly owning a home, making a loan, and buying a home outright for your children or grandchildren. Each of these avenues of financial support has its own perks and pitfalls.

First, consider how any assistance could affect family relationships. Your children or their spouses may be anxious or uncomfortable about accepting financial help from parents or in-laws. Siblings' feelings matter, too. "If you have multiple children, spend some time up front to understand how giving or loaning to one child might affect family dynamics," says Mitchell Kraus, a certified financial planner based in Santa Monica, Calif. "We've seen years of resentment coming from a small loan to one family member when it was not available to another."

The lowdown on loans. One option that could benefit both parties is an intra-family loan. You may be able to offer your child a lower interest rate than a conventional mortgage lender would while still earning a higher interest rate than you could earn from a savings account. For example, if you provide your child with a mortgage at a 4.5% interest rate, you'll earn more than four percentage points more than the 0.23% average yield for a bank savings account. Your child, meanwhile, will pay significantly less than the national average for a 30-year fixed-rate mortgage, which was 6.1% in early February.