Should You Give Your Kid A Down Payment?

Question

Interesting article ... This is how my wife and got started out of college when we had no savings. That small gift has blossomed over the years - not only increasing our quality of life for us and our kids but has become the foundation of our finances. Assuming one can afford such a gift and they have a responsible son/daughter, it's a great idea especially now with ownership being cheaper than renting in some areas. What do you think? Have you either been the receipient or the donor in such a situation and how has the experience worked or not worked out?

http://money.cnn.com/2010/12/03/real_estate/helping_kids_homebuy.moneymag/index.htm

Jeffrey K. · Answer

This is why the rich get richer. Realtyman, I agree with you in some aspects of life, but when it comes to buying real estate I do not agree. My parents helped me with the money to buy my frist investment property. I did not expect them to help me out with my down payment on my primary residence. If you have the money and your kid is a hard worker, there is no reason to not help them out. It is not making them lazy. They still have to make the payments!

Mike McKinzie · Answer

My parents did something a little different, they sold me a house for the same price they paid for it. They had refinanced it so that they had all their own money out of it plus a few years of positive cash flow. Shortly after taking title, I refinanced it to pay off the loan in my parents name. And I still own that property.

Jason Wheeler · Answer

On my first deal my parents helped me with interest and the stipulation that they would be paid back on the investment. I lost out on that deal but since have been able to get them back. Not sure where I would be without that first deal though...

Mary R. · Answer

I'm not in a position to help either of my 30s+ kids with THAT kind of help. I doubt either would accept it, either. What I can do is offer a little now and then as extra principal only payments ON that mortgage. Being able to do that for myself helped me into the position I'm in now. Neither of my kids can do that just yet, and I know that at the start of a mortgage, even a few bucks extra on principal only, even sporadically, makes a difference.

Dale Osborn · Answer

By supplying the down payment - you are basically crippling your kids. Instead of giving them a fish now, teach them how to fish for a lifetime of financial security. We have too many people in the world sticking their hands out for hand outs from the government. This will continue to get worse until we get our school system changed. Instead of passing out hand outs like a down payment - teach your kids how to stand on their own 2 feet and make enough income to afford a home on their own. This way they will not be handicapped for the rest of their lives - expecting someone to bail them out like the banks when they get in financial problems.

Account Closed · Answer

sorry realtyman, but i disagree as well....the children still have to qualify for the mortgage which includes having a stady job for the past few years and good credit

J Scott · Answer

In my opinion, if my kids haven't purchased their first property by the time they're 18, I'm not doing a very good job of teaching them how to invest (likewise if they haven't started at least a couple businesses by that time). Hopefully they'll have the money from the businesses to be able to afford the real estate, but if not, I'll be happy to supply it. As Jeffrey said, this is how the rich stay rich -- they don't have to pass the money down, but certainly need to instill the right mindset in their children and if that means helping out when the kids are young, so be it. My hope is that my kids will be more skilled at investing by the time they're 25 than I'll ever be (perhaps that's not saying much :)...

Carl Schmitt · Answer

If my parents had the money to give me for a down payment, I'm not sure I'd be able to take it. Sure, it would be nice to have the help and in 30 years, I wouldn't be able to look back and say that I did it myself. Now, if I switched the roles and my kids wanted to start their investing career, I would want to help them. I'd say it depends on your kids goals.

Bienes Raices · Answer

I loaned my brother a downpayment (years ago). He paid it back.

Harry M. · Answer

It's a tricky one. When we got our house 8 years ago, we had a little help - a couple of thousand from my father-in-law and a good friend. We paid for everything else ourselves and paid them back within a few months. There was an enormous sense of accomplishment in moving from a 550 sqft apartment to a nice house in the suburbs, and having done it ourselves. I can't help but think it would have been diminished if we'd had too much help. But you can't deny the kind of advantage that would give a person if they were able to find that sense of accomplishment elsewhere (or maybe giving them 50% of the downpayment rather than everything).