helping you through the house-selling process

Selling real estate can be just as much work as buying. There are so many things to worry about as you prepare your home to list on the market. Then you have to worry about the real estate agent you will hire to help you get the house sold. After that, you have to worry about who will be coming in to tour your home throughout the week. Will you hold an open house? Do you take the first reasonable offer you are presented with? Our blog was designed to assist you through the selling process a little bit easier.

3 Tips to Know Before Loaning Your Kids Money for a Home Purchase Down Payment


One of the best ways of helping your child to buy a home is to loan them money for the down payment.  This is much better than giving them the money because it teaches them financial responsibility. Here are a few things you should know before going ahead with the loan:         

The Lender May Require Your Name on the Contract

If you want to help your child buy a house, it may be helpful to have both of your names on the title. For example, doing that means that the child cannot sell the house without your permission. Unfortunately, most lenders will require your name on the mortgage contract if your name is on the title. This is the case even if you have agreed with the child that the responsibility of the mortgage is solely theirs.

Putting your name on the mortgage contract means that you will also be on the hook if the child defaults on their mortgage payments. This means a default will impact both of your credit ratings. You may be forced to choose between not having your name on the title and shouldering the consequences that may occur if the child defaults on the loan.

The Child May Still Be Required to Meet Other Debt Requirements

Raising the down payment is just one of the many difficulties that make it difficult for youngsters to buy homes, but it isn't the only one. Typical mortgage requirements such as a good credit score, steady job, and low debt-to-income ratio still have to be met. This means the loan may not help your child much if they don't have the other qualifying criteria; it only works if that is the only thing between the child and their dream home. Otherwise, you may have to assist in other ways, for example, by co-signing the loan so that your financial strength can convince the lender to release the money.

It May Be Difficult to Escape the Tax Liability of the Loan

Lastly, you should know that the taxman will be looking over your shoulder and expecting some money when you loan your child the down payment. Ideally, this should only be the case if you will be earning some interest on the money. However, the IRS doesn't care whether you will be getting interest or not, it errs on the side of caution (its caution, to be sure) and assumes that all such loans attract interest rates. Therefore, it may be difficult to escape the tax liability.

To learn more about the ins and outs of helping your kids with a loan, contact local real estate brokers.


16 October 2017