Tips for Helping Your Kids Buy a First Home

First-time homebuyers are facing daunting obstacles—high prices, high down payments and high interest rates.

It’s no wonder that only 51.5% of millennials owned homes in 2022, according to U.S. Census data. In fact, they are the slowest generation to reach the 50% ownership mark. The other half don’t think they will ever own one.

It’s a problem for many families that AMG can help solve. There are many arrows in the finance quiver beside a conventional mortgage that can be nocked to help our kids and grandkids join the American dream and have one of the basic building blocks of wealth creation.

On the more traditional side, banks like AMG can provide a Home Equity Line of Credit (HELOC) to make additional funds available for homebuying. To lower costs for the HELOC, parents can secure the loan with their investment assets, but they need to make certain they maintain enough assets in their accounts to cover the loan’s term.

Then, parents or grandparents could transfer the HELOC funds to the children using one of these methods:

Gifts – Everyone can gift up to $12.9 million in 2023 ($25.8 for a married couple) during their lifetime. That rises to $13.6 million per person in 2024. This exemption can be used to outright buy the home or just to provide a larger down payment to reduce the monthly payments needed for a conventional mortgage. This is a simple and straightforward way of gifting, but helping to purchase a slowly appreciating asset like a home may not be the most efficient use of the money.

Family loan – Parents can become the bank and loan their children or grandchildren the money at significantly lower interest rates than the 7.2% national average for mortgages. The children can either pay the interest or it can be forgiven as part of an annual gift, and the lifetime exemption mentioned above is preserved for other needs.

Depending on your situation, one or some mix of the above ideas may help your family members buck the trend and own a home, without breaking their own piggy bank.