How To Go About Buying Your Parents a House
Have you ever thought about buying a home for your parents? While those who wish to do so may come from a place of good intentions, this is an important decision to make as a buyer — or buyers, if you plan to have siblings go in on the purchase.
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Carefully keep the following considerations in mind if you are thinking about purchasing a home for your parents. Plus, there’s another option you can explore if plans to buy a new home don’t pan out.
Talk It Over With All Siblings
If you have siblings and are interested in purchasing a home, make sure to talk to your entire family before moving forward. Real estate professional and broker Theresa Raymond said if the individual and their siblings have a strong bond, this can be a great strategy to secure a good family home.
“With the sky-rising mortgage rates and house prices, it is getting harder for buyers to have a home. If all siblings cash in together, the per head investment would be a lot more minimal compared to the total cost,” Raymond said.
Siblings who all go in on the purchase of a new home may also distribute the home equity among themselves legally. It is strongly recommended everyone is on board with the purchase and everyone on the loan is on the title as well. If a sibling is unable to go in on the purchase, be it for reasons such as a recent job loss or financial instability, consider tabling the discussion until everyone is able to agree to it.
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Availing a Home Loan
If all siblings agree to purchase a home together and need to take out a loan, there might be some issues when availing of a home loan.
Martin Carreon, broker and owner at Soco Wine Country Properties, uses the example of two brothers who want to be co-applicants for a home loan. Carreon said they would only be able to do this if they live together in the same property. The two brothers need to be co-owners of the property for which they are taking the loan. A brother and sister, Carreon said, cannot be co-applicants for a home loan.
If you do not plan to take out a loan for the home purchase, this is not an issue. Those who do must consider availing a home loan before purchasing a home with their sibling or siblings.
Other Potential Issues
What other issues could siblings run into if they want to buy a home for their parents?
Boyd Rudy, associate broker at Dwellings Michigan, said there are other potential drawbacks to this purchase. Some of these include paying more than the property is worth. Buyers will also need to factor in any home maintenance and repair costs for their loved ones.
What If I Can’t Afford To Buy a Family Member a New Home?
If you are unable to afford a home for your parents, or your parents simply do not want to move into a new home, there is another option children may consider. Inquire if your parents have an existing mortgage on their home. If they do, there’s a good chance siblings may want to go all-in on paying off this debt.
Paying off an existing mortgage can be extremely beneficial for family members on fixed incomes or those struggling to keep up with loan payments.
In many ways, Raymond said it can offer almost the same benefits as purchasing a new home. Parents have already bought the house, allowing their children who pay off their mortgage to claim equity in the house for the remaining value paid and secure the home to remain within their family.
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