Supporting home ownership for the next generation – Part 2

Supporting home ownership for the next generation – Part 2

Supporting home ownership for the next generation – Part 2

Mark Wells at Preferred Financial Services continues the discussion on how parents and grandparents can help the next generation become homeowners.

Sometimes it seems like my children are not that interested in owning a home. What should I tell them that might encourage them to take a look at the benefits of home ownership?   Property ownership is the cornerstone of a free society, and our tax system has been structured to encourage home ownership. Mortgage interest, property taxes, and PMI premiums are all tax deductible. Once you can deduct these items, many other types of itemized deductions can be taken, since you can file a Schedule A (Itemized deduction schedule) instead of just taking the standard deduction. On an average basis, a person paying $750 monthly rent can afford to make a $900 house payment since the tax deductions actually leave them with more net income.

What about equity building? Do homes still build the same kind of equity that we saw through the ‘80s and ‘90s?  Even if real estate values did not increase a penny over time, the fact that part of the monthly house payment goes to principle reduction assures that homeowners are accumulating equity. For instance, a $165,000 house will have a monthly payment of around $1,000. In five years, the note balance will be around $141,000 so the homeowner will have accumulated $24,000 in that short period. If historic trends prevail, the home will gain 2–3 percent in value each year, adding another $12,000 to $15,000 equity over that five-year period. A renter would have paid $60,000 in rent over five years and have nothing to show for it.

Besides helping them establish a healthy credit report like you mentioned in your first column, what other things can I do to help my children or grandchildren own a home?  One thing I often suggest to young people just getting out of school and settling into a job is that they ‘practice’ owning a home from day one. By that, I mean if they are living with parents, put aside a house payment each month, just as though they were making a house payment. This does two things: it teaches them to live within a budget that includes housing, and most importantly, it accumulates down payment they will need when they are ready to buy a house. If they are renting, I encourage them to rent a slightly lower-priced apartment (or share the rent with another person) and practice putting aside an additional 10-25 percent over and above their rent, for the same purpose.

With so much at stake—tax breaks, equity building, and financial security, it is imperative that we help the next generation with home ownership.

I am more than happy to meet with your kids or grand kids and help them put a plan in place to purchase a home in the future.

I can be reached at (864) 235-9596, or by email at

Have Questions? Text Me Now! 864-430-4856