Should You Help Your Child Buy Their First Home? Pros, Cons, and Smart Strategies

It’s a common question we hear from parents, especially those nearing retirement or already financially secure:

“Should I help my child buy a house?”

With sky-high home prices, stiff competition, and rising mortgage rates, many first-time buyers need a leg up. And many parents want to help. But doing so can have long-term implications for your child and your own financial health.

Here’s a practical guide to weighing the pros, cons, and how to do it wisely.

The Pros of Helping Your Child Buy a Home

• They Get In the Market Sooner: The earlier your child becomes a homeowner, the sooner they can begin building equity and avoiding rent increases. For many, homeownership is still a major wealth-building tool.
• You Reduce Their Financial Stress: With 20% down payments often topping six figures, your help might be the only way they can get in the game without excessive debt or PMI (private mortgage insurance).
• It Can Be a Meaningful Gift: Some parents see this as part of their legacy, using their financial position to improve their kids’ quality of life and stability.

The Potential Downsides to Consider

• It May Put Your Retirement at Risk: Before giving or loaning money, be sure your own retirement is fully funded. Many parents underestimate healthcare costs, longevity risk, or market volatility, and can’t easily “make it back” once retired.
• It Can Create Unequal Expectations: If you have multiple children, giving money to one can create family tension. Make sure your decision is part of a broader estate and gifting plan.
• There Are Tax Implications: For 2025, you can gift up to $18,000 per child (or $36,000 as a couple) annually without filing a gift tax return. Anything above that needs to be reported to the IRS (though it won’t necessarily trigger taxes).

Ways to Help — Without Hurting Yourself

1. Gift part of the down payment
   This is the most common approach. Be sure the gift is well-documented — most lenders will require a letter stating the money is a gift, not a loan.
   
   
2. Loan the money (with a written agreement)
   You can act as the “bank” with an intra-family loan. To stay on the IRS’s good side, charge at least the Applicable Federal Rate (AFR), and structure repayment terms in writing.
   
   
3.  Co-sign the mortgage — with caution
   This might help your child qualify, but it also puts your credit (and finances) on the hook if they default.
   
   
4. Buy a share of the home 
   Some parents structure it as a shared investment, owning part of the home and agreeing upfront on exit terms.

Best Practices to Avoid Regret

• Stress-test your retirement plan before committing money. Can you still retire on time? Travel? Cover emergencies?
• Talk openly as a family about expectations. Will this gift impact future inheritance? Will siblings be treated equally?
• Set clear boundaries. Are you helping once or open to future support? Put it in writing if needed.
• Work with a planner who understands tax laws, real estate planning, and family dynamics.

Final Thoughts

Helping your child buy a home can be a beautiful act of generosity, but it shouldn’t jeopardize your financial independence. With the right structure, clarity, and planning, you can support your children and protect your future.

Let Sandbox Financial Partners help you run the numbers, evaluate your options, and design a plan that works for your whole family. Contact us today to start the conversation.