To help their adult children, more parents are reportedly taking out equity in their own home so their child can buy a home of their own.
More parents are finding that their adult children need the extra financial footing in order to compete in areas where bidding wars have become commonplace.
The additional funds are helping adult children avoid making a deal contingent on financing and also helping to make their offers more attractive to sellers.
Parents have several options for tapping the equity in their homes, such as cash-out refinances or a home equity loan.
Even millennials with high-paying jobs and sizable down payments have been losing out in some bidding wars due to high competition, particularly in markets like Washington, Boston, and Seattle, says Nela Richardson, Redfin’s chief economist. By having a parent take out a home equity line of credit to give their child a full purchase price, some millennials are better positioned to then win against multiple bids.