Three ways to help your child buy a home

With home prices increasing, and given the current interest rate environment, first-time homebuying could be challenging for someone in their 20s or 30s. And those looking to upgrade to a larger home or move to a better school district for their growing family may feel the pinch, too. As a parent or grandparent, you may have the financial resources to help a family member.

Here are a few considerations you should factor in as you determine whether helping a child or grandchild purchase a home is financially right for you.

“The most important thing is to discover whether you can afford to assist a child or grandchild,” says Bob Petix, senior wealth strategist for Wells Fargo Wealth & Investment Management, Wells Fargo Bank, N.A. “Here at Wells Fargo, your financial advisor can run an analysis of your wealth plan to see what impact such a commitment could have on your long-term goals.”

As you consider your options, you can factor in scenarios like your anticipated retirement date and integration of your other major life goals. Several factors come into play when considering the feasibility of assisting with the house purchase, says Petix:

• How much is required
• Your net worth
• Your spending rate
• The liquidity of your assets
• The tax status of your wealth (for example, will funds be coming from taxable or tax-deferred accounts?)

Below are three common approaches to helping a family member purchase a home.

1. Outright gift

If you can afford to do so, you can help by making an outright gift of all or a portion of the purchase price. Or you can make a gift of all or some of the down payment, which could allow a child to qualify for a mortgage. Petix says that making an outright gift has the benefit of simplicity, but it’s important to understand the gift tax implications of this approach.

In 2025, you can gift up to $19,000 a year per individual; if both parents make a gift, that total is $38,000 per donee. If you exceed the annual gift tax exclusion, the excess amount of the gift can reduce your lifetime gift tax exclusion (how much you can give away in future years). In 2025, the lifetime exclusion is $13.99 million or $27.98 million for a couple. “Utilizing some of your lifetime exclusion means you’ve made gifts that have served to make people happy while you’re still alive.” Says Petix.

2. Family loan

While the interest rate environment may not impact outright gifting, it does affect making intra-family loans. If you’re able to finance the purchase of a home, you may be able to offer the buyer a better rate than regular lenders.

It is usually important to follow most of the formalities that would normally apply with a third-party loan. “It helps to set clear ground rules when making the loan,” Petix says. One item of particular importance is to be sure there is sufficient homeowner’s insurance on the property.

3. Create a trust

In the case that you want to have the added benefit of extending some asset protection for your child or grandchild, to guard against potential claims (such as by a child’s ex-spouse), you could create a trust and fund it with resources to purchase a home or for a downpayment. The trust could own the home and would be responsible for payment of a mortgage. In this scenario, Petix recommends consulting with an estate planning attorney to decide what structure is best.

For more information about helping your child or grandchild purchase a home, talk to your investment, tax, and estate planning advisors.