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Should you help your adult child with a downpayment on a house?



When It’s a Good Idea...

If it’s a good investment. If you plan to lend the money instead of gifting it, you may reap some financial benefits. “Many of my clients feel that bonds will likely return very little if any returns for the next decade,” says T. Eric Reich, CFP and President of Reich Asset Management in Marmora, N.J. “You can lend money at a cheaper rate than banks and possibly get a greater return than you could expect in a fixed-income portfolio for the foreseeable future.”

If your child has a steady source of income. Make sure your child can afford all of the responsibilities of owning a home. “For instance, if your child has just completed graduate school or is already employed in a position that has a strong earnings trajectory, then consider a loan with an agreed upon timetable for repayment,” says  Milder.

John Reinmuth, 74, a retired pastor from Gig Harbor, Washington, and his late wife Jan, a former elementary school teacher who died in 2013, decided to help their son who works in  theater set construction and their daughter-in-law who works in a college admissions office with a the purchase of a house. The Reinmuths matched what the young couple could accumulate with a gift of $8,000, helping them to buy a starter home with a 10% down payment.

And In 2011, the Reinmuths gave a daughter and son-in-law $12.000 toward a down payment.  Added to their savings, the couple made a 20% down payment, eliminating the need for private mortgage insurance and got a better interest rate, Reinmuth says. 

“Working with a certified financial professional, we learned that our pensions, Social Security, and IRAs provided a 98% likelihood that our retirement resources would not run out before we died,” Reinmuth says. “Thus, we felt comfortable helping our son and daughter-in-law to purchase a house."