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Mortgage for Children

 

As you undoubtedly know, the residential housing market (and to a much lesser extent the commercial real estate market) is currently going through one of the worst periods it has seen in decades, but there is one segment that is rejoicing. 


Record low property valuations and equally low mortgage rates make this an extremely attractive buyer’s market.  The catch is that lending has become equally stringent and prospective young buyers, without a credit history to speak of, are not at the top of any bank’s customer list.

This is the root of an interesting trend that emerged last year. The National Association of Realtors (NAR) reports that one third of all first time home buyers in 2011 received help from their parents in the shape of a gift or a loan. This has several benefits for both parties as long as the decision is approached with suitable caution and some planning.


Parents can easily help their child out by giving a straight forward cash payout as long as certain limits are observed. Alternatively, a larger amount can be given in the shape of a loan that could have much more favorable terms than any bank loan. The parents are also at an advantage as even after paying taxes on the interest earned, they stand to earn more than they would on the average money market bond.

To read more on the advantages of this scheme, please continue reading here.



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