Yes, parents can finance their children's mortgages, typically by co-signing, providing a cash gift for a down payment, or acting as the lender via an intrafamily loan. These methods help children qualify for better rates or larger loans, but they carry risks, including legal liability for the parents if the child defaults.
Yes. If your child is qualified to purchase a home, you can gift him or her deposit and or down payment money in almost all cases.
If you want to hold a mortgage for a family member, you could offer them seller financing on the property in question. For example, let's say you are selling your child a home you own outright, you could use a holding mortgage seller financing agreement in which the child would make mortgage payments to you.
Buy or finance the home through a trust
While there are many ways to structure a purchase this way, the most common is for a parent or grandparent to set up an irrevocable trust for the benefit of the child and then make a gift to the trust.
There are various ways your parents could help you get a mortgage or buy a house, including options that don't require them to gift you large sums of cash. These include adding part of or all of your parent's income to your mortgage application as a guarantor through an Income Boost.
The "$100,000 loophole" for family loans refers to a tax rule where lenders avoid reporting imputed interest if the total loan amount (plus any other outstanding loans to that borrower) is $100,000 or less, and the borrower's net investment income is $1,000 or less; otherwise, the lender's taxable imputed interest is limited to the borrower's actual net investment income, avoiding the higher Applicable Federal Rates (AFR) normally required, making it a way to offer lower-interest loans with minimal tax hassle for the family.
20% for the down payment – Allocate at least 20% of the property's value as a down payment. 30% for EMIs – Ensure that your Equated Monthly Installment (EMI) does not exceed 30% of your monthly income. 40% for savings and financial goals – Maintain a 40% buffer of your income for savings and future financial goals.
While the Family Opportunity Mortgage offers many benefits, it's essential to consider the potential drawbacks. These can include a longer approval process due to the additional documentation required. You'll also need to consider the financial responsibility of taking on a second mortgage.
How to Help Your Adult Child Buy a Home
Scenario: Interest-free loans
If you don't charge interest, the IRS can say the amount of interest you should have charged was a gift based on current tax rules. In that case, the interest money goes toward your annual gift-giving limit of $19,000 per individual as of tax year 2025 (up from $18,000 in 2024).
Parents can loan money to their children to purchase the home, but legally the parents must charge interest to the kids and then declare the interest they earn as income. The loan can be structured to provide a minimum interest rate, which the IRS publishes monthly for loans between related parties.
For 2021, you can forgive up to $15,000 per borrower ($30,000 if your spouse joins in the gift) without paying gift taxes or using any of your lifetime exemption. (These amounts are the same as in 2020.)
Yes, your parents can gift you $100,000 for a house — but they'll have to file a gift tax return to disclose the gift since it exceeds the IRS exclusion amount of $18,000. Filing a return doesn't necessarily mean they'll automatically have to pay taxes.
Calculate 5% of a home's purchase price divided by 12 to get your monthly break-even rent. If actual rent exceeds this figure, buying is typically the better choice. The rule accounts for property taxes, maintenance, insurance, and opportunity costs.
Yes, you can gift your son $100,000, but since it's over the 2025 annual exclusion of $19,000, you'll need to file a gift tax return (Form 709), though you likely won't owe taxes unless you've already used up your large lifetime exemption (over $13.99 million in 2025). Your son pays no tax on the gift, but you, as the giver, must report the amount exceeding the annual limit, which counts against your lifetime exemption.
The IRS primarily learns about large gifts when you file Form 709, the Gift Tax Return, for amounts exceeding the annual exclusion (e.g., $19,000 per person in 2025). They can also discover gifts through third-party reporting (banks reporting large cash transfers), audits of your estate, or by matching transactions to public records, especially for significant asset transfers like property, which might trigger property tax reassessments.
At a glance:
Any gifts exceeding $19,000 in a year must be reported and contribute to your lifetime exclusion amount. You can gift up to $13.99 million over your lifetime without paying a gift tax on it (as of 2025).