One of the greatest gifts you can give someone is the gift of property. A house is a safe haven for someone to live and property is generally a good investment since it increases in value over time.
There are generally two scenarios when people start to think about gifting property. First, as people begin to draw up their wills and estate plans, they look for ways to give property to their children. Second, many people want to give back to their family or parents when they have the means to do so.
We explore the different ways to gift property to loved ones, so you choose which is right for you and your situation. Don’t wait until after you have bought property to start thinking about giving this priceless gift.
Passing Property to Children or Family Members
When you purchase a new home for yourself, consider adding your children as joint tenants with sole survivorship rights. This means that your children will be listed on the deed and the house will be passed to them if in the case of your passing. Alternatively, you can pass property on as inheritance by adding the house to your will. If you have the means you can also gift the property outright while you are still alive to see your loved ones enjoy the property during your lifetime.
Each option has its pros and cons, and requires serious legal analysis. So, please discuss your plan with your will and estate planning lawyer to decide which is right for you.
Gifting Property to a Parent or Loved One
It is a dream for many children to be able to gift a home to their parents or other loved ones. If you are considering buying a property for someone special in your life consider the following ways to give it to them.
If the down payment is holding your loved one back from purchasing a home, consider gifting the down payment to them. In this scenario, your loved ones will be the only name on the deed but they will also need enough income to qualify for a mortgage on their own.
If they don’t meet the requirements for a mortgage, even with the help of a down payment, you may be able to co-sign on the home loan. Your income and credit would help to strengthen the case for them to get a mortgage. However, it would also mean you are liable for the house and mortgage in the same way they are. If for some reason your loved ones miss mortgage payments, you must pick up the slack.
If you would like to keep them out of the payment process completely, you can purchase the home as a second residence in their name. In most cases, an occupied second residence would be viewed as an investment property. This typically comes with very high interest rates and rates of down payment. However, there are some schemes designed for children to buy homes for elderly parents. In some cases, you get a loan with a down payment as little as 5% with this scheme. However, you will be required to prove your relationship with your parents as well as both your financial situation and potentially theirs, also. It is a good option for someone with an above average income to get a fixed term mortgage and gift a property to their loved ones.
There are an almost endless amount of ways to gift property but we have discussed the most popular options. If you have any questions, contact your local real estate lawyer to learn more. Property is a gift that keeps on giving. You are guaranteed to feel great about giving it.