- June 2018 -

A Helping Hand

You've no doubt read about the propensity of young homebuyers relying on their parents for help with their down payments. In fact, more than one-third of Millennials looking to purchase their first home are reportedly relying on financial help from a relative to help cover at least part of their down payment. Is it a good idea to contribute to your own child's down payment, either as a gift or as a loan?


YES if you have extra money just sitting in a low-interest bank account, and you lend it to your child instead of just giving it to them. You can lend it at a cheaper rate than they would be able to borrow elsewhere, yet receive higher interest from them than what you might currently be getting in a fixed-income portfolio.


NO if you're nearing retirement and the only way you can help your child is to either dip into your retirement savings, or stop contributing to your retirement plans in order to redirect it to your child.


Whether you decide to gift the down payment, or loan your child the money to put down on a property, there are obviously many considerations to ponder when making a decision that incorporates both finances and family, from tax ramifications to family feuds. Talk to both a financial professional and a lawyer, and if you feel confident that your child is ready and that their finances are secure enough to support home ownership, be sure to put your final financial arrangement clearly in writing on a legal document, to protect all parties involved and avoid any misunderstandings.


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