The Bank of Mom and Dad
The No. 7 U.S. lender isn’t a big bank of FinTech firm. Nope. According to a new analysis, it’s good old mom and dad.Verify your new rate (Jul 14th, 2020)
Shaking down the family tree
According to a new study from Legal & General Group — dubbed the “2019 Bank of Mom and Dad Report” — parents lent more than $47 billion to their homebuying children last year, making them the seventh largest lender in the nation.
As the report puts it, “It has millions of satisfied customers, has never asked for a bailout, and really cares about its borrowers: As a home loan lender in the United States, the Bank of Mom and Dad stands alone.”
All in all, parents (as well as some grandparents and other family members) helped fund 1.2 million home purchases in 2018 — about one in every five transactions. The total value of those purchases clocked in at $317 billion.
The study found that young homebuyers are increasingly expecting this help, too. More than half of prospective homeowners surveyed under 35 expect to get financial assistance from family or friends for their purchase. A full fifth of homeowners said they already received that help.
Young buyers were more likely to take their parents for help in the Pacific region, with 27 percent of recent homeowners saying they received assistance. Southwest and Rocky Mountain buyers received the least financial help from mom and dad.
Offering their kids a leg up isn’t always easy though. The report found that 15 percent had to take out a loan, 8 percent had to tap 401K savings and 6 percent had to downsize their own properties in order to help their loved ones. Fifteen percent of these “lenders” say they have a lower standard of living since helping out.
“Like all banks, though, BoMaD has its limits and, unlike for some, there’s no one to step in if its capital runs out,” the report reads. “One way or another, many of those helping their loved ones to buy are already making real sacrifices to do so. The survey shows many people at or approaching retirement age – and many who are adjusting to life on a lower income are making real sacrifices to help younger buyers.”Verify your new rate (Jul 14th, 2020)
Get today’s mortgage rates
Is the Bank of Mom and Dad not an option for you? Want to see what top mortgage lenders have to offer? Then shop around and see what mortgage rates you qualify for today.Verify your new rate (Jul 14th, 2020)