As per recent reports, there are increasingly large numbers of parents who are offering their children a leg up towards the property ladder due to the fact that home prices keep fluctuating throughout the US. Since there is no such additional relief given to the first-timers, parents often need to shell out money to help their children buy houses. Unless the young generation has rich parents, it is tough for them to realize their dream of becoming a young homeowner.

While parents are struggling themselves to secure their heads within their family, their kids are lucky enough to have parents who are always ready to lend their helping hand. Here are few facts which parents should know before helping their young adults in getting home loans within their affordability.

Fact #1: Conflicts may arise due to money issues

The sole consideration that you have to keep in mind while buying a home is whether or not you can afford to have so much money tied up for such a long period of time. Usually, families that offer home loans to their children are the ones who are extremely wealthy and as per financial planners, if you think you can rely on home loan payments to finance your retirement, then missed or late payments can put you into a tough state of affairs. Give him a mortgage only when you’re sure that he is financially independent. Make sure such money matters don’t set a bad impact on the relationship that you share with him.

Fact #2: You need to follow the rules for mortgage interest deduction

If you can follow the steps to avert any kind of gift tax, you’ll get the most if you could ensure that your child can deduct the payments towards mortgage interest rate. The parents have to issue their child with an IRS Form 1098 to report the interest rate which the child paid on his home loan over due course of the entire year. The 1098 informs how much rate to claim as tax deduction on his tax return. The parents should declare the total interest that has been earned on the loan via IRS Form 1099 and report this as tax returns.

Fact #3: You need to follow the rules of the government to avert gift taxes

If you wish to lend a large sum of money to your child, you’ve got to do it in the best way to avoid any kind of tax-liability. Next, you should document the loan properly. Parents need to work with the title company to design the deed of trust documents and record them with the country where the residence is located. This is the formal loan document that should be executed between child and parents.

Hence, if you wish to offer a sum of money to your child for helping him buy a home, you can take into account the above mentioned information in order to go about the process in the smoothest manner.