If you’ve reached the point where you’re financially stable, helping your parents get a new home may seem like a dream come true. But it’s also a decision that’s more co♍mplicated and riskier than you 🔜may realize.

Adult children can assist their parents with a new home purchase in several ways, from 澳洲幸运5官方开奖结果体彩网:cosigning on a loan to offering funds for a 澳洲幸运5官方开奖结果体彩网:down payment. Before proceeding, it’s important 🍎to realize that some options make more financial sense than others.🌊

Cosigning on a Mortgage

The simplest way to help your parents is by cosigning the mortgage, or signing your name alongside your parents' on the mortgage documents, especially if they have low income. This wasn't always the case, as it used to be uncommon for borrowers to need a cosigner. But when the housing market crashed, lenders tightened their 澳洲幸运5官方开奖结果体彩网:underwriting policies, making it harder for lower-income individuals to qualify or get favorable terms.

Bear in mind that most lenders review the 澳洲幸运5官方开奖结果体彩网:credit scores of all borrowers before offering a loan. As such, a cosigner won't make much of a difference if your parents have poor credit or recently filed for bankruptcy. However, lenders typically combine the income of all the borrowers when determining the 澳洲幸运5官方开奖结果体彩网:loan-to-value ratio, so ha✅ving a cosigner can🅘 make it easier to qualify for a larger loan.

Cosigning may help if your parents are older. When the child’s name is on the title and designated as a 澳洲幸运5官方开奖结果体彩网🔴:joint tenant with the right of survivorship, the property can be immediately transferred after death, eliminating a lengthy and complex probate process.

But regardless of whether you live in the home or not, you’re equally responsible for the 澳洲幸运5官方开奖结果体彩网:mortgage payments. If your parents fall behind a few years down the line, it will likely end up on your 澳洲幸运5官方开奖结果体彩网:credit report. Having a large loan, even if it's paid on time, can also bring down your score and mak🍸e it harder for you to access credit for yourself.

Down Payment Assistance

Consider helping with the down payment if you don't want to hurt your credit score. This can be a powerful tool for seniors because a smaller loan is easier to pay down on a 澳洲幸运5官方开奖结果体彩网:fixed income.

Lenders tend to get skittish about a large deposit that was just made to a parent's bank account. Why? Because it could represent borrowed money that they will have to pay back. To avoid that problem, experts say it’s better to give the money far in advance. If a lender asks for their most recent 澳洲幸运5官方开奖结果体彩网:bank statements when applying for the mortgage, the deposit won't ap൩pear.

There may be long-term tax implications, depending on the size of the gift. The 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) allows individuals to give up to $19,000 for calendar year 2025 ($18,000 for 2024) to each recipient. This means you can give each parent that amount without cutting into the lifetime exclusion (a spouse can also gift up to the $19,000 limit to each parent). Consider breaking the gift into separate installments to stay under the annual limit for larger amounts. Larger amounts count against your lifetime gift-tax exclusion, which could result in larger estate taxes.

You should also consider the long-term effects of this strategy unless you have deep pockets. Any money you give your parents now is money you won’t have later.

Renting to Parents

Why not buy the home and rent it out to𝕴 your parents? This can be a tempting option because of the myriad tax deductions you may qualify for when you rent a property, including:

• 澳洲幸运5官方开奖结果体彩网:Mortgage interest
• 澳洲幸运5官方开奖结果体彩网:Property taxes
• 澳洲幸运5官方开奖结果体彩网:Maintenance costs
• 澳洲幸运5官方开奖结果体彩网:Depreciation expenses

Lenders typically classify second homes as investment properties, which means you'll probably have to pay a higher interest rate than the mortgage on a primary residence. Those higher rates may offset any 澳洲幸运5官方开奖结果体彩网:tax breaks you receive.

To take your landlord deductions, you need to charge a competitive price. If you’re asking for less than the property's 澳洲幸运5官方开奖结果体彩网:fair market value (FMV), the IRS considers the home for your personal use. Consequently, you can’t deduct rental-based expenses like depreciation.

You may be tempted to cut a deal for your parents, but make sure you understand the financial implications before doing so. Meeting with a 澳洲幸运5官方开奖结果体彩网:tax advisor before you buy the rental property can be a 🌳good way to navigate those issues.☂

Top Ways to Help Your Parents Buy a Home

The best way to help your parents buy a home is ultimately the one that causes the least financial stress for everyone involved. Here are some of the key things you may want to keep in mind when deciding how to help your pare🐟nts buy a home:

• Credit scores. A good credit score is crucial to secure the best 澳洲幸运5官方开奖结果体彩网:interest rates. Consider the rates you'll qualify for if you decide to cosign for your parents or buy an investment property. Make sure you consider how cosigning could affect your credit if your parents can't meet their financial obligations.
• Cost. Different costs may need to be paid upfront or on an ongoing basis. For example, gifting money toward a down payment is considered a one-time expense. But if you invest in a 澳洲幸运5官方开奖结果体彩网:rental property, you'll have to consider where mortgage payments, insurance, maintenance, and repairs fit into your budget.
• Long-term planning. Helping your parents buy a home can provide some financial relief in the short term, but consider what that may mean down the line. For example, what would happen to the home if you cosign and they move into a nursing home or pass away? If you hand over $50,000 for a down payment, would you be able to get that money back if they choose to sell the property or pass it down to you? Having these discussions can help you decide if assisting parents with a home purchase makes sense for everyone involved.

The Bottom Line

For those who can afford it, helping parents with a home purchase is one of the best ways you can support them in their later years. But before moving forward, it’s important to understand all the ramifications of your various options.