Parents Offer To Let Their Adult Son Borrow Money To Buy A House, But Still Want Him To Pay Interest
He explained that his parents would have a stake in his home, which caused a bit of division on whether he should agree to the plan at all.
Krakenimages.com | Shutterstock A 27-year-old man questioned whether he should take up his parents' offer to help him buy a house, but one stipulation has caused a bit of division.
During a clip from "The Ramsey Show," a podcast where host Dave Ramsey and his co-hosts listen to callers financial issues and give advice, the unnamed young man claimed that in his mind, his parents were giving him a fairly good deal to become a homeowner, but not everyone agreed.
His parents let him borrow money to buy a house but still want him to pay interest.
"I just got an offer from my parents. They'd help me buy a house, I'd enter into a contract with them where they would basically be the bank. They would fund the entirety of the purchase price, and I would pay them back," the unnamed 27-year-old informed Ramsey and his co-host during a podcast episode.
He explained that even though his parents let him borrow money to buy a home, he was still expected to pay them back with added interest. He insisted that his parents' offer would be a much better deal than if he had tried to buy a home without the financial aid, and the interest would only have to be 6.5% instead of an estimated 7% or more if he had purchased the home on his own.
However, he questioned if Ramsey and his co-host would agree with the decision and if it was something that he should do.
After being asked a series of follow-up questions, including a more in-depth detailing of what this agreement with his parents would entail, he claimed that in addition to helping him buy the home, his parents would also own 25% of it. His role would be paying off 75% of the home, and if down the line he ever wanted to sell it, they would be given back their $100,000 of the total $400,000 home and 25% of any profit made.
Ramsey bluntly informed him that he should accept his parents' offer and that if he were to get married, it would be a nightmare situation.
He claimed that this young man should back out of the deal he made with his parents and ultimately try to figure out a different way to buy a home without relying on their financial assistance.
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"It's not a great idea. It sucks beyond belief," Ramsey told him. "It's gonna end in ashes. Please don't do it. When you're 30, and you're married, and you want to refinance the house, and you have to buy out the 25%, your wife is going to be so [angry] at your parents."
In this economy, buying a home has become less and less of a possibility and more of a pipe dream, especially for millennials and Gen Zers. There's absolutely nothing wrong with parents offering financial assistance to their child to purchase a home, and just because that child is now an adult doesn't mean they should be suddenly absolved of receiving any kind of assistance and support from their parents.
Ramsey's advice was that if the young man can't afford to buy a home, then he shouldn't buy a home, which is reasonable, but also a bit jaded.
At this point in time, buying a home is nearly impossible. If he were to wait until he could afford to buy a home with his own money, then unfortunately, he might end up waiting longer than he would like to.
A staggering number of Americans are concerned about the state of homeownership.
Respondents explained in a Bankrate survey conducted by research firm YouGov that their biggest roadblock to buying a home is affordability. Most members of the Gen Z and millennial generations want to own a home someday, or even right now.
Nearly three-quarters (74%) of American adults still view homeownership as a top hallmark of achieving the so-called American Dream, beating out the ability to retire (66%), a successful career (60%), and having children (40%). Specifically among millennials, 65% identified homeownership as a top sign of success.
That number fell to 59% for Gen Zers — still a large figure and was neck-and-neck with that generation’s top choice of having a successful career (60%).
Many young adults still live at home with their parents and depend on them for financial independence because of the state of the economy and the cost of living.
There's absolutely nothing wrong with that, and it's such a Westernized idea that adult children should not be looking to their parents for anything, especially money.
However, the role of being a parent is for life. Even when your kids are grown, it doesn't mean that you're suddenly stripped of all your parental duties. Of course, these duties look different at every stage of a child's life, but the essence of it stays the same — providing support when you see your child struggling.
Nia Tipton is a Chicago-based entertainment, news, and lifestyle writer whose work delves into modern-day issues and experiences.