The survey, conducted for loanDepot by GFK Custom Research North America, found that 17 percent of parents with adult children ages 18-35 expect to help them buy a home in the next 5 years, compared to 13 percent in the past five years – an increase of 31 percent.
Half (50 percent) of the parents who expect to help their children buy a home say they’ll contribute toward down payments. The number of parents who say they would allow their children to move back home or stay home to save money increased significantly, from 8 percent to 22 percent and 11 percent to 33 percent, respectively. About 20 percent say they will likely cosign the loan.
“Support from parents is playing a significant role in the housing recovery, and this new research indicates the trend will increase,” said Dave Norris, president and chief operations officer at loanDepot LLC. “First-time home buyers comprise 28 percent of the today’s home buying market, an almost all-time low. Through the survey, 75 percent of Millennial-age home buyers who received financial support from their parents said that assistance made it possible for them to buy a home. Without that financial support, it’s likely the pool of Millennial first-time home buyers would be even smaller than today.”
HOW WILL PARENTS HELP OUT?
While more parents in the future expect to help their children buy a home, the loanDepot survey reveals that mom and dad's past financial support with down payments will shift to other options.
In the past, 65 percent of parents who helped their kids buy a home chipped in on the down payment, with nearly 20 percent of them paying 90 percent or more towards the down. In the future, the number of parents planning to help with the down payment is expected to drop to 50 percent, and only 8 percent expect to contribute 90 percent of the down payment.
In the future, parents will likely be more willing to open their wallets wider to pay student loan debt or "other expenses" and to welcome their boomerang children back to the nest than in the past. In fact, one in three (30%) parents expect to pay "other expenses" so their children can save money, and 18 percent expect to help pay down student loan debt. In the past, only 11 percent of parents paid down their children’s student loan debt to save money to buy a home.
Over half (55%) of the parents expect their kids will continue living with them or said they may have them move back home to save money for that first home.
How Parents Help their Children Buy a Home
|
Form of Assistance |
Past Five Years |
Future Purchases |
|
Contribute to down payment |
65% |
50% |
|
Paid Other Expenses So they Could Save Money |
25% |
30% |
|
Help with closing costs |
24% |
20% |
|
Co-sign the mortgage |
21% |
20% |
|
Helped Pay Down Student Loan Debt |
11% |
18% |
|
Continue to live at home to Save Money |
11% |
33% |
|
Moved back home |
8% |
22% |
|
Help pay their rent for a While |
7% |
8% |
WHERE WILL PARENTS GET THE MONEY TO HELP?
About 67 percent said they’ll use money from their savings to help their children buy a home, down from 72 percent in the past.
The number of parents who plan to use cash from a home loan refinance or personal loan to help their children buy a home is expected to double, from 4 percent and 8 percent on a refinance to 3 percent to 8 percent on personal loans.
The loanDepot research surfaced opposing views between parents and Millennial-aged buyers about whether or not the parent’s financial support was or will be a gift, loan, inheritance or something else altogether. While most parents (68%) view the financial support as a gift, only 29 percent of Millennial-aged children agreed. More Millennials (36%) view their parent’s financial support as a loan to be repaid than as a gift (29%).
Future & Past: Sources of Parental Support
|
Sources of funds |
Past Five Years |
Future Purchases |
|
Savings |
72% |
67% |
|
Other |
7% |
1% |
|
Refinance current home |
4% |
8% |
|
Unsecured personal loan |
3% |
8% |
|
Borrow from 401K |
2% |
4% |
|
Sold/Sell Primary Residence, Used Proceeds |
2% |
2% |
|
Sold Equities, Used Proceeds |
8% |
5% |
|
Don’t Know |
2% |
5% |
This new research was completed Feb 13, 2015, for loanDepot LLC, America’s consumer lender, by GFK Custom Research North America by completing 1000 interviews with parents of Millennial-aged children and 1,000 interviews of Millennial-age adults, ages 18 to 38.
A loanDepot licensed loan officer can help with these and any other lending questions. Call (888) 983-3240 to speak with one today.
