More millennials are finally leaving their parents’ homes to form their own households, but they may need financial help to do it.
A new report by consumer lender loanDepot shows that about two-thirds of parents – or 67 percent – will use savings to help their children buy a home. loanDepot surveyed 1,000 parents and 1,000 millennials (those between 18 and 38 years old) to find out about parents’ financial assistance in a home purchase.
Seventy-five percent of the millennial-aged home buyers who received financial help from their parents said the assistance was what made it possible for them to buy a home, according to the survey.
"Support from parents is playing a significant role in the housing recovery, and this new research indicates the trend will increase," says Dave Norris, president and chief operations officer at loanDepot. "Without that financial support, it’s likely the pool of millennial first-time buyers would be even smaller than today."
Half of the parents who plan to help their children purchase a home said they plan to contribute toward the down payment, while 20 percent say they will cover closing costs and 20 percent will cosign the loan, according to the survey.
About 68 percent of parents who plan to help their adult child purchase a home say they will do so with no strings attached – providing financial support without expecting any payment in return. But 36 percent of millennials surveyed say they would view any parental financial aid toward a home purchase as a loan that will need to be repaid in the future.
"Our new survey confirms most millennials plan to own a home someday, and their parents are more than supportive of their efforts," Norris says. "Their interest in home ownership will likely pick up once they start their own families, reduce debt, and have been working long enough to earn a decent income and save money."