For many parents and grandparents, it’s tough watching younger family members try to buy their first home today. You know the long term stability and financial growth homeownership can provide. Naturally, you want the next generation to have that same opportunity.
But with the affordability challenges buyers have faced in recent years, getting into the market can feel difficult for first time buyers. While conditions are starting to improve, many still struggle with one major obstacle.
What many homeowners do not realize is that the equity they have built over time may create a unique opportunity to help.
The Equity Advantage Many Homeowners Have
If you have owned your home for several years, or even decades, two important things likely happened during that time.
• Home values increased
• Your mortgage balance decreased, or may even be completely paid off
Together, those two factors build equity. For many homeowners today, that equity has grown to a substantial amount.
Most people think of equity primarily as something reserved for retirement or future financial security. While that may still be true, it can also provide another opportunity. It could help younger family members overcome one of the biggest barriers to homeownership.
The Biggest Challenge First Time Buyers Face
When John Burns Research & Consulting (JBREC) surveyed renters about why they have not purchased a home yet, the top answer was not mortgage rates or home prices. The most common challenge was the upfront cost, especially saving enough for a down payment (see graph below).
This is where family support can make a meaningful difference.
While you cannot control mortgage rates or housing prices, you may be able to help with the upfront cost. In many cases, even a small portion of your equity could help a loved one move closer to homeownership.
That support does not necessarily mean putting your own financial future at risk. With thoughtful planning, you may still retain the majority of your equity for retirement while helping a family member achieve an important milestone.
Over the next two decades, an estimated $68 trillion to $84 trillion in wealth is expected to transfer from older generations to younger ones. Because of that, many families are already thinking about when and how financial support might happen.
For some, helping with a first home purchase may be one of the most meaningful ways to pass along that wealth.
Family Support Is Already Helping Many Buyers
A growing number of first time buyers are receiving help from family members to make their purchase possible. According to the National Association of Realtors (NAR), nearly 1 in 5 first time buyers receive a cash gift from family or loved ones to help cover their down payment.
Other buyers are using inheritances or loans from family members to enter the housing market as well (see charts below).
A Personal Decision for Every Family
Every family situation is different, and financial decisions should always be considered carefully.
Still, homeowners who have built strong equity positions may have more flexibility than they realize. For some families, sharing a portion of that equity can help create long term stability and opportunity for the next generation.
Helping a loved one buy their first home is not just a financial gesture. It can provide security, independence, and a foundation that may benefit them for decades.
Bottom Line
If you are curious how much equity you have built and what options it may create, it may be worth having a conversation. Your home equity could open doors not only for your future, but for the next generation as well.
The information and opinions in this article are not investment advice. Tim Stice makes no guarantees about accuracy or completeness. Always do your own research and consult a professional before making financial decisions. Tim Stice is not liable for any loss or damage resulting from reliance on this content.
Tim Stice, Broker Realtor | Hawaii Life | Maui, Hawaii | Real Estate Agent
