3 Ways to Help your Adult Child Purchase a Home in Anchorage
Our Millennial generation is struggling. From heavy student loan debt to a lack of jobs, those that want to purchase a home are typically unable to do so. In fact, according to the United States Census Bureau, about 30 percent of them are still living at home with their parents.
Many Anchorage parents want to help. Many can’t. If you are among those that can - whether your aim is to push the “baby” bird from the nest or help him build wealth the American way, through real estate – how can you help?
Should you help?
The pick-yourself-up-by-the-bootstraps type of parent may worry about creating a financially-dependent monster by giving their child a house in Anchorage. This may happen but, then again, it may not. It depends on your offspring’s level of responsibility and maturity.
The mature, responsible adult child may just require a leg-up on the ladder to self-sufficiency. If so, consider your financial help an investment.
The different forms of “help”
“Help,” can take a number of forms. If you can afford it, you might purchase an Anchorage home outright and give it to your child. Consider these strategies, as well:
- Use a share-equity agreement when you purchase the home.
- Help your child purchase by gifting the down payment and closing costs.
- Be the lender by loaning the money to your child at a lower-than-market interest rate.
Let’s take a closer look at some of these alternatives.
The share-equity plan
If your child has some of the money she will need to buy a home in Anchorage, a shared equity financing agreement may be the ideal way to help. You will contribute the money she lacks and then treat your share of the home as an investment, deducting your part of the expenses, mortgage interest and maintenance on your taxes. This is definitely a situation that requires the assistance of an attorney and/or accountant.
Be the lender
Consider making a loan for either the down payment or for the purchase price, depending on your child’s financial circumstances. This will need to be done legally, with all the proper documents, stating specific repayment terms. Whether or not to charge interest is entirely up to you. Again, this is a situation that requires the assistance of a professional or two, such as your accountant and attorney.
Buy it and lease it
If you have the extra money you may just want to purchase the home outright and gift it to the child over an extended period of time. This can be done via a lease-option arrangement (wherein you still maintain the tax benefits of owning the home) or via a rental agreement in which you gift a percentage of ownership each year (to stay under the gift tax penalty) until he owns the home in its entirety.
Whichever route you choose to take to help your adult child on the road to homeownership in Anchorage, it is critical that you talk it over first with your financial advisor.