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Helping Your Child Buy a Home: Smart Strategies

Buying a first home can be a challenge for many young people, especially with rising property prices. As a parent, you can play an important role in supporting your child through this significant step. Below are some smart strategies to help your child purchase their home.

1. Tax-Free Gift

One straightforward way to support your child is through a tax-free gift. In 2024, you can give your child up to €6,633 tax-free annually. For buying a home, there’s a one-time higher exemption of €31,813. Certain conditions apply:

  • Your child (or their partner) must be between 18 and 40 years old.

  • The higher exemption must not have been used previously for housing or education.

  • The gifted amount must be spent on the property.

  • The funds must be used by the end of 2024.

  • The transaction must be documented in writing.

2. Family Mortgage

Another option is providing a family mortgage. This involves lending your child a sum of money for the property, with agreements about:

  • The loan amount.

  • The term of the loan.

  • The interest rate and its fixed period.

  • The repayment schedule.

This loan can be combined with a standard mortgage. However, keep in mind that the loaned amount may affect your child’s maximum mortgage eligibility. To avoid misunderstandings, it’s advisable to have the agreement formalized by a notary.

3. Using Your Home’s Equity

Many parents have built up equity in their own home due to rising property values. You can use this equity to help your child, for example by:

  • Taking out a second mortgage on your home.

  • Withdrawing a portion of the equity and gifting or lending it to your child.

It’s essential to consider the tax implications of this option and seek advice from a financial expert.

4. Buying a Property and Renting It to Your Child

Another possibility is purchasing a property yourself and renting it to your child. While this approach offers flexibility, there are a few considerations:

  • You won’t be eligible for mortgage interest deduction on the second property.

  • The second property will be considered an asset and is subject to capital gains tax.

Alternatively, you can co-purchase a property with your child, making both of you co-owners. In this case, you’ll pay capital gains tax on your share, and you won’t qualify for mortgage interest deduction. However, your child can still claim a deduction on their share.

For these types of arrangements, it’s crucial to seek legal and tax advice to make the best choice.

Why Choose KIJCK. makelaars?

Would you like to learn more about how to support your child in buying a home? At KIJCK. makelaars, we’re here to guide you every step of the way. We offer free property valuations, so you’ll know exactly what your home is worth. This helps you make well-informed decisions.

Feel free to contact us for a no-obligation consultation. Together, we’ll ensure that you and your child can take this step with confidence.

Latest update:

Team Komma