According to Legal and General, a British multinational financial services company, parents in the US give and/or loan their kids an average of $39,000 to help them buy a home.
The “Bank of Mom and Dad,” again according to Legal and General in an article by Elizabeth O’Brien for msn.news, supported the purchase of some $317B worth of properties across the US in 2018. (And, if the Bank of Mom and Dad were an actual business, it would be the seventh largest mortgage lender in the country.)
Parents, family and friends are supporting their kids in home purchases most likely on the heels of supporting them through college. The difference in such support? John Godfrey, the corporate affairs director with Legal and General, said that many parents anticipate and save to help cover their kids’ college costs and tuition while they don’t do the same when it comes to helping their kids cover housing costs.
Such parental assistance is coming at a time when rising home prices and student loan debt have put homeownership out of reach for many. According to the Federal Housing Finance Agency, the average US home price in 2018 was approximately $310,000. Meanwhile, the Federal Reserve Bank of St. Louis put the average sales price of a US home at $377,000 in Q1 2019.
And, the average student loan debt incurred by 2018’s college graduating class was $29,800, according to Student Loan Hero.
Remember, agents, that parents who help their kids purchase a home may be on shaky financial footing themselves. 7% report postponing their retirement by an average of seven years; 14% report feeling less secure about their own financial future; and 15% have had to accept a lower standard of living as a result of their “helping.” Be kind to those parents, agents…kind and patient.
And always know that parental loans to kids to help purchase a home usually end up as gifts, rather than loans. Again agents, pay attention to everyone’s egos and be overtly grateful to all involved.