Gifting Your Child With a Down Payment

November 28, 2011

With today’s affordable home prices and historically low mortgage rates, more young adults are asking for help from their families to take their first step towards home ownership. Last year, according to the National Association of Realtors, 36% of first-time buyers paid the down payment on their home with a financial gift from their parents or other family. 

These financial gifts can also be put toward a 2nd home, where the whole family can enjoy vacations together and make wonderful memories for years to come. A 20 percent down payment makes getting a loan easier for your children, and they won’t have to pay private mortgage insurance (PMI). If you want to help your child, you and your spouse can each give $13,000 tax-free per year to your child, and another $13,000 each to his or her spouse.

Helping your children buy a first home or a vacation home for the whole family to use, is a wonderful gesture. Be sure to talk with a qualified financial advisor to see how to give this special gift without tax penalties.