With 30-year mortgage rates above 7 percent, many young buyers in the Philadelphia suburbs can afford the down payment but not the monthly payment. Parents who are in a position to help have more tools than they may realize, and the best of them can save a child hundreds of dollars a month.
Think of this as the starting point. It lays out the six most common ways families help, who each one suits, and links to a deeper guide on each.
Why the rate gap matters right now
The IRS publishes a minimum interest rate for loans between family members, called the applicable federal rate (AFR). In November 2026, the long-term AFR was 5.52 percent. Freddie Mac’s average 30-year mortgage rate at the end of October was 7.24 percent.
| $600,000, 30-year loan | Monthly principal and interest |
|---|---|
| Bank mortgage at 7.24% | About $4,089 |
| Family loan at 5.52% | About $3,414 |
| Difference | About $675 a month, or $8,100 a year |
That gap is why so many families are looking at lending to their children instead of, or alongside, a bank.
Six ways families help
1. Gift the down payment
The simplest option. In 2026, each parent can give each child $19,000 a year without a gift tax return, and larger gifts rarely cost anything because of the $15 million lifetime exemption. The lender will need a gift letter and proof of the transfer. Read: Gifting a down payment in 2026.
2. Lend the money at the IRS rate
The parents lend the child the money, at or above the AFR, under a written note and a recorded mortgage. The child pays the parents instead of a bank, may be able to deduct the interest if they itemize, and the parents can forgive part of it each year if they choose. Read: Family loans and the IRS rate.
3. Lend through a family trust
Many families already have trusts that can lend to children or grandchildren, if the trust document allows it. The trust can lend for the purchase, or even own the home. Read: Can a family trust lend money to buy a house? and Buying a house in a trust in Pennsylvania.
4. Sell the family home with a gift of equity
Parents who are ready to move can sell their home to a child below market value, with the difference counting as the down payment. In Pennsylvania, a sale between parent and child is generally excluded from realty transfer tax. Read: Gift of equity.
5. Buy with cash, then finance
In competitive markets, a cash offer can win the home. The buyer can then take a mortgage within six months to recover much of the cash, through what lenders call delayed financing. The child must be the cash buyer on title, and money the parents gave as a gift cannot be repaid from the new loan, so parents who want their money back should lend it instead. Read: Delayed financing explained.
6. Co-sign or co-own
A parent can co-sign the child’s mortgage or buy the home with them. It can help a child qualify, but the parent becomes responsible for the debt and, as a co-owner, shares in the home’s risks and decisions. It works best when everyone agrees in writing on how a sale or buyout would work.
Which approach fits
| If the family wants… | Consider |
|---|---|
| The simplest help with the down payment | A gift |
| A lower monthly payment for the child, with money returned to the family | A family loan at the AFR |
| To use assets already in trust, or protect the home from a child’s creditors | A trust loan, or trust ownership |
| To pass on the family home | A gift of equity |
| To win a competitive home quickly | A cash purchase with delayed financing |
Many families combine them, for example a gift for the down payment plus a family loan instead of a bank mortgage.
And for parents: what about your own home?
Helping a child often happens alongside a bigger question: should you sell the family home, give it away, or keep it? The tax answer can be surprising. Read: Sell your home or leave it to your children? The step-up in basis.
Questions to bring to your advisors
- How much can we comfortably give or lend without affecting our own retirement?
- Should this be a gift, a loan, or a mix, and how do we keep it fair to our other children?
- Who will prepare and record the loan documents, and who will handle the tax reporting?
- How will this fit with our estate plan and any trusts we already have?
Where Karen fits
Karen Langsfeld is a REALTOR® and Pricing Strategy Advisor (P.S.A.) with Berkshire Hathaway HomeServices Fox & Roach. She helps families find and win the right home for a child, prices family sales with a documented valuation, and coordinates timing with the family’s attorney, accountant, and lender, so the financial plan and the home purchase line up. Learn more about helping your family buy or sell a home.
Contact Karen at (215) 495-2914 or through the contact page.
This guide is general information, not legal, tax, or lending advice. Confirm your plan with your attorney, accountant, and lender. Sources: IRS Revenue Ruling 2026-21; IRS Revenue Procedure 2025-32; Freddie Mac Primary Mortgage Market Survey; Fannie Mae Selling Guide; 72 P.S. section 8102-C.3.