Family Wealth & Real Estate: How to Help the Next Generation Buy Homes

Rising interest rates, tighter lending criteria, and high home prices have made it more challenging than ever to purchase a first home—especially in competitive markets like San Diego. The result? Younger generations feel like homeownership is getting increasingly out of reach. But you could offer them hope.

If you have significant home equity and financial assets, you could be in a unique position to help your children or grandchildren take that first step toward building wealth through real estate. If you’re considering how to support your loved ones without putting your own retirement at risk, here are some strategic ways to go about it.

Three Ways to Offer Help and Support

1. Gift a Down Payment

When it comes to helping your children buy a home, one of the most straightforward ways to help is by gifting them funds for a down payment. This can reduce the amount they need to borrow, improve their mortgage terms, and lower their monthly payments.

That said, it’s important to keep gift tax rules in mind. Currently, any gift over $19,000 may require your child to file a gift tax return. It’s best to consult a tax advisor before gifting a significant amount of money.

Because generational family wealth and real estate tend to go hand in hand, you won’t only be helping your child purchase their first property—you’re helping set them and future generations up for financial success.

2. Buy a Home Together

With the rising cost of living, gifting a down payment may not be feasible; there are other ways to help! Consider a shared ownership situation in which you go in on a home with your son or daughter. Multi-generational living not only helps save on expenses and the cost of homeownership but also helps you build equity as a family.

With thoughtful planning, shared ownership or multi-generational living could create financial stability while strengthening family bonds.

3. Co-Sign a Mortgage

Another way to help is by co-signing a mortgage with your child. By including your credit score or income, you may be able to help them qualify for a better loan.

However, there’s one very important factor to keep in mind: You’ll be legally responsible for the loan if your child defaults. That could affect your own ability to borrow in the future. If you choose this route, it’s imperative to set clear expectations and have open conversations about responsibilities.

How to Use Your Equity to Build Generational Wealth

Have you been in your current home for years, making steady monthly payments? Then you’ve likely built up a significant amount of equity. There are ways of using home equity for family purposes, including building generational wealth. Here’s how.

HELOC or Cash-Out Refi

A home equity line of credit (HELOC) or a cash-out refinance could provide the funds needed for a down payment or help pay off high-interest debt. If this is the best option for you and your family, just be sure to consider the impact it’ll have on your monthly budget and have a plan for repaying the borrowed amount.

Refinance

If you’re still paying a mortgage, refinancing may free up cash flow, but only if you can secure a lower interest rate than what you currently have or extend the loan term. Refinancing could offer more financial flexibility to assist family members without sacrificing your own stability.

Downsizing

Another way to unlock your equity is by selling your current home and moving to a smaller, more affordable one. You may choose to gift part of the proceeds to help your kids with their own home purchase while still securing your future in a more manageable space.

Sharing Your Smart Financial Habits

When it comes to how to help your kids buy homes, financial support is just one piece of the puzzle. Just as important is passing down the financial habits and homeownership knowledge you’ve gained over the years. Empower them by:

• Helping prepare them for mortgage responsibilities: Talk about what homeownership really means and how to budget for homeowners insurance, property taxes, repairs, and other costs that they may not be thinking about.
• Encouraging financial literacy: Discuss the importance of understanding different loan options and set them up for success by introducing them to a trusted real estate agent or financial advisor who can help guide them.
• Exploring all available options: There are many different ways to buy a home, build equity, and create generational wealth; help your children by exploring all of them. Investing in properties together as a family could ultimately be the right move for you and your loved ones.

We’ll Help You and Your Kids Achieve Real Estate Goals

There’s no one-size-fits-all approach to helping your kids buy homes. Book a consultation with The Selby Team to start exploring all the options available to you. Together, we’ll help your family build a legacy, one home at a time.