The American dream of homeownership is quickly moving out of reach for many, with almost 25% of millennials surveyed saying that they expect to rent forever. For those who do hope to buy a home, the majority reported having no funds for a down payment.

If you’re looking for ways to help your kids purchase their first home, leveraging the equity that you have in your home through a home equity loan may be a way to do it.

Use a Home Equity Loan to Help Kids Buy a Home

Before taking out a home equity loan 澳洲幸运5官方开奖结果体彩网:to help your kids buy their first home, consider the rest of the assets that you may have available. If you have other assets such as investment properties, cash savings, or retirement accounts, sit down with a 澳洲幸运5官方开奖结果体彩网:financial planner to see which i🦹s the best to pull fro🍌m for this purpose.

You may find that selling an investment property or allowing your kids to live there for reduced or zero rent may be a better option than taking out a home equity loan, especially under economic conditions with 澳洲幸运5官方开奖结果体彩网:high-interest rates. A home equity loan requires a minimum of 10% 澳洲幸运5官方开奖结果体彩网:equity in your home, good credit, and proof of income sufficient to repay the loan.

Once approved for the loan, the cash is yours to do as you see fit. Keep in mind that you’ll be making fixed monthly payments, including interest on the amount borrowed for the length of the loan. If you’re 10 years from retirement, make sure you caꦜn still afford t♐o make loan payments after retirement or get a home equity loan with a shorter loan term.

Cash for a Down Payment

Giving your kids cash for a down payment may be the easiest way to help them buy a home, but it may not be enough. 澳洲幸运5官方开奖结果体彩网:Gift taxes limit your cash after the first $18,000 per recipient per year in 2024 and $19,000 for 2025.

If you and your spouse each give $19,000 to your child in 2025 for a total of $38,000, that can go towards a downpayment but probably won't cover the 20% down payment required to avoid 澳洲幸运5官方开奖结果体彩网:private mortgage insurance.

If your kids are only putting 3.5% down through a 澳洲幸运5官方开奖结果体彩网:Federal Housꦬing Administration (FHA) loꦺan, they could potentially purchase a house worth approximately $1,075,000 with a $38,000 down payment.

However, FHA loans carry additional costs, most notably the large up-front and annual 澳洲幸运5官方开奖结果体彩网:mortgage insurance premiums that stay on for the life of the loan. In hot real estate markets, 🥀some home sellers are hesitant about accepting FHA offers if a non-FHA❀ offer is available, as FHA loans have stringent appraisal and inspection requirements.

Help Paying Down Debt

One of the factors preventing your children from buying a home may be their 澳洲幸运5官方开奖结果体彩网:debt-to-income (DTI) ratio. Student loan debt reached a record $1.773 trillion in 2025. If your kids have large student loan payments, it may be hard for them to get approved for a mortgage. Most lenders prefer a DTI of 36% or less, which can be difficult for recent graduates to attain with current college costs and entry-level salaries.

If you help your kids pay off their student loans with the proceeds from a home equity loan, you can help them get approved for a mortgage. However, keep in mind that gift tax rules may still apply.

The Bottom Line

If you’re willing to take on more debt to help your kids achieve homeownership, taking out a home equity loan may be a way to do it. You can use your home equity loan proceeds any way you like, but helping with a down payment or helping them pay down debt that may be affecting their mortgage approval is the most effective way to help them buy their first home.