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Subscribe to RSSShould parents help a family member pay for a new home? Financially and emotionally, it can be a great investment - but at what price?
Getting a mortgage can be difficult in perfect economic conditions, but trying to gather enough money to buy that new home can be quite the challenge when banks have tightened lending standards.
"If the child is going to the parent in the first place (for a loan), it's often because they don't qualify with a bank," says Barbara Corcoran, TODAY's real estate expert. "If they don't qualify with a bank, there's a reason for that. The parent is assuming a great deal of financial risk."
What happens if the new homeowner cannot cover the monthly mortgage? The parent is on the hook.
The key is whether the individual can afford the loan and repay it on time, Barbara says.
There is some great advice and background info to think about from Barbara. The video says it all.
Real estate expert Barbara Corcoran offers advice on co-signing a loan or lending money to family members to pay for a home.
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No I wouldn't pay their mortgage, I would & have bought a second property and rented it to them. Gives me a tax break and them a cheap place to live 25 miles from me! Cool huh
Lending anyone money changes the relationship. Borrower is slave to the lender! I want my children to be my children, not indentured servants. No matter how hard you try, lending kids money will change they way they look at you and, if there are problems paying it back, creating a real chasm in the relationship. I would want to avoid that, even if it means saying NO.
My father generously paid closing costs for a home he knew we would have no problem making mortgage payments on. But...we purchased a home that is big enough for him and us. He is in his 70s and although is independent now he will be slowly transitioning to our home in the next 5 years so to him it was also an investment in his future. My father has never loaned us money, there have been a few gifts and I hope I can do the same for my children when they are in need. As a parent, I think if you have to "loan" the money to your children you really don't have enough to hand out in the first place. If you think at 30yrs old you're teaching your child responsibilty by loaning it, really this is a lesson better kearned in childhood. You will be disapointed now. If you feel so moved as to give to your children, good for you, I hope the gratitude is all you need in repayment.
No, co-signing or making the loan for them does not teach any financial responsibility. Perhaps loaning or giving them some money for closing or down payment seems the best option, if you can afford to. But if they want to own a home, they should stand on their own two feet and pay for it. If they cant, then they need to rent until they can.