Buying a House for the Kids: What Parents Should Know

Thanks to the lingering effects of the recent housing crisis and Great Recession, it’s been a difficult few years for young people who want to purchase their first home. While this trend is slowly changing, many parents have attempted to alleviate the situation by buying a house for their kids – in fact, the number of parents making this choice has risen significantly in the last several years. While there are many wonderful things about this option, it’s wise to spend the time needed to determine whether or not it’s really right for you. Read on to learn more.

Buying a House: Options to Consider

If you’re interested in buying a house for your kids, here are the main options:

• You can give the adult child a down payment for the house
• You can purchase the home in your name and let the child live there without paying rent
• You can purchase the home in your name and rent it out to your child
• You can finance the home and structure an official loan and payments, wherein your child pays you back according to a monthly schedule

Why Buy a Home for Your Children?

The joys of home ownership are many, and if you’ve ever considered buying a house for your kids, now may be a great time to give it some further thought. In addition to the fact that the move will help the child enjoy independence and may even teach him or her about how to construct and manage a mortgage, there are also several distinct benefits for parents.

For one, parents who pursue this option may enjoy tax benefits – especially when it comes to interest on the mortgage and property taxes. Things like repairs to a second home may also count as tax deductions, depending on your unique location and situation.

Additionally, there’s the large and critical benefit of equity. By building equity in the home and ensuring that the home will sell for more money than it was originally purchased for, it’s easy to enjoy all of the benefits of building assets, while also helping your children learn about the joys of home ownership.

Be advised, though, that while there are many benefits to this approach, buying a house for a child is also a significant financial commitment and may come at a higher interest rate than the purchase of a first home.

Is This Option Right for You?

If you’re considering buying a house for your children, there are benefits and drawbacks. While opting to purchase a home for your kids can help them live independently and learn about paying a mortgage and owning a home, it’s also a large commitment that you must be fully prepared for.