How Can I Help My Parents Downsize?

It’s no secret that letting go of the family home is hard for aging parents. With so many memories of kids running up and down the steps and tossing footballs in the yard, many seniors remain in a house that has more room than they need—and more maintenance than they can handle. What’s more, moving in the golden years can be overwhelming. Decluttering and packing is a huge job, and securing a mortgage after retirement is intimidating on a fixed income. 

Many adult children are aware that downsizing a parents’ house is needed; they just aren’t sure how to make it happen. If you’re in this situation and need help convincing your parents to move or want to know how to help them purchase a smaller home, we have some tips.

If your parents are reluctant to downsize, try to help them focus on what they would gain by moving. When your mom has trouble going up and down steps, for instance, explain how much easier a single-story home would be. If your dad loves to grow vegetables but can no longer take care of the large yard, pull up a small home online that has just enough room for a small garden. By planting ideas in their heads about a life with more comfort and freedom, you can start a discussion that doesn’t make them feel forced to make a decision.

Once you’ve had several conversations about downsizing, you can begin to discuss the important factors involved such as:

If you’re not sure about your parents’ financial situation, now is the time to bring it up. Go over the expected profit on the sale of their home and whether that can be used as a down payment. If they haven’t planned for future expenses such as nursing home care, it may be wise to tuck some of that money away. You should also discuss how much retirement savings they have and what their maximum budget would be for a mortgage.

Accessibility

Even if they are in good health now, any future handicap concerns should be considered when downsizing your parents’ house. A single-story home with wider doorways and walk-in showers will make it easier to maneuver a wheelchair. Laundry should be on the main floor. And if they’re willing to live in a condo, they’ll need to be on the ground level unless there is an elevator.  

Maintenance

One way to avoid maintenance completely is to move into a rental property. But many seniors still would prefer to own a home. When discussing how much maintenance your parents are capable of handling, keep in mind that if they overestimate, they may end up paying someone else to take care of it. Or, you might be taking it over before you know it. Factors like the size of the yard and the length of the driveway will come into play when mowing and shoveling. Condos and senior communities typically include those services in their fees, so discuss whether that is an option they can afford. 

Location

If you have moved away from your hometown, downsizing your parents’ house may offer a good opportunity to bring them closer to you. Ask if they would be willing to relocate so you can stop by for dinner more often, or so they can attend the grandkids’ games. A dreaded move could end up being a fun experience for the whole family.  

Many seniors don’t plan for downsizing and may need help buying a house. The best option for doing so will depend on your budget and theirs.

If your parents have consistent income for a mortgage payment but can’t afford the upfront costs of buying a home, you can provide it. Whether you put 5% or 20% down, it helps them move and doesn’t put your credit score at risk. 

Co-signing a mortgage for your parents means you guarantee the loan for them. Perhaps you have a better credit score or a larger consistent income, making it easier for you to get the loan amount they need. Just keep in mind that if your parents can’t pay their mortgage at any point, you will be making the payments. If you don’t, your parents will risk losing their home and your credit score will drop. 

Consider buying a house for your parents as a rental property. You can charge them rent, but they won’t have to pay taxes and other costs of homeownership. While you will have to treat their rent payments as income on your own taxes you’ll be able to deduct costs for repairs, maintenance, mortgage interest, property taxes, and property insurance.

For investment property loans, lenders usually require a credit score of at least 620 and debt-to-income ratio (DTI) below 43%. They may also require proof of 6 months' worth of expenses for the home in reserve. 

If you can afford two mortgages and your parents don’t have sufficient savings or a consistent income, you could look into buying a home as a gift. If the house will stay in your name, it is considered a second home, and you may be required to put down at least 20% for the down payment. Using the equity in your primary home is an option if you have enough. Be aware that some lenders require that a second home be more than 50 miles from a primary residence, which isn’t suitable if your parents need consistent care.

Keep in mind that there are also tax implications for the giver of this type of gift. Individuals are allowed to give gifts up to $17,000 to as many people as they want. The limit is $34,000 for married couples. Since a house will exceed that amount, you will need to file an additional form (Form 709) with your income tax return. Taxes won’t be due on the gift unless a lifetime exclusion of $12.92 million (doubled for married couples) is reached. So while it won’t cost any additional tax, gifting a home will add the inconvenience of a more complicated tax return. (These are the current rates for 2023.)

You can put your name, your parents' names, or all of your names on the deed, but be aware of the legal and financial ramifications of each option. If only your parents' names are on the deed, they will be responsible for paying property taxes and will be able to deduct mortgage payments. If your name is on it, you will pay taxes and deduct mortgage payments even if your parents pay you rent. Talk to your accountant if you have questions about how this will affect your return. 

In many cases, seniors need to sell a house first in order to put money down on their next home. But if you are helping with a down payment or your parents are willing to make a contingency offer, it’s okay to buy and sell a house at the same time.

In fact, having a contract on the line with an exact closing date might spark your parents to start decluttering and packing. They will need to get rid of a lot of stuff in order to downsize. Looking forward to their next adventure may make it easier to say goodbye to those memories.

Downsizing is an emotional life event that your family doesn’t have to go through alone. Our team has the knowledge and understanding to help you choose the perfect home for your loved ones in the best location and within your budget. Start the process by contacting a Berkshire Hathaway HomeServices Select Properties agent today. 

Cover photo by Koto by Getty Images by Canva.com