More first-time buyers are likely to turn to mom and pop for financial assistance when buying a home in the years ahead, and the ways parents contribute are likely to shift to some degree, according to a survey commissioned by nonbank lender loanDepot LLC.
Seventeen percent of parents with adult children between the ages of 18 and 35 expect to help their children buy a home in the next five years, compared to 13 percent in the past five years — an increase of 31 percent, loanDepot wrote in a post on the survey.
First-time homebuyer activity is already close to an all-time low, but the share of home sales attributable to that group would be even smaller if not for the financial assistance parents have provided to many young adults, said Dave Norris, president and chief operations officer at loanDepot LLC.
Seventy-five percent of millennial-age respondents who said they have received financial support from their parents when buying a home said that assistance made it possible for them to buy a home, he said.
But the ways that parents provide this assistance may be shifting.
Source: loanDepot
Sixty-five percent of parents who helped their kids buy a home in the last five years chipped in by putting money toward a down payment, with almost 2 in 10 of that group covering nearly 90 percent of a down payment, according to the survey.
But only half of parents who expect to help their children buy homes in the future anticipate subsidizing a down payment, with less than 1 in 10 indicating that they expect to contribute 90 percent or more of a down payment.
The survey suggests that parents who lend a helping hand to their children who buy homes in the years ahead will be more likely to provide assistance by paying off student loan debt or letting their kids live at home so they can save money than they were in the past, according to the survey.
Parents will also be more likely to tap certain sources of cash to help their kids buy homes than they have in the past, according to the survey.
While 72 percent of parents who helped their kids buy homes in the last five years drew on their savings to chip in, 67 percent of respondents who plan to help their kids buy a home in the future said they’ll turn to their savings.
Meanwhile, the share of parents who use funds acquired by refinancing or through a personal loan to help their children buy homes is expected to double compared to the last five years, according to the survey.
Real estate agents who are thinking about advising prospective buyers to ask mom and dad for help should consider another survey finding: Millennials are much more likely than their parents to believe that they must repay assistance from mom and pop.
Source: loanDepot