‘Bank of Mom and Dad’ would be 7th biggest lender in US
Family lending is widespread and can have a steep cost for the lenders, Legal & General reports.
The Bank of Mom and Dad (BoMaD) isn’t new as kids have been borrowing or receiving gifts from parents for years. But a new study by Legal & General, a U.K.-based financial services firm and global investor with $1.27 trillion in assets, has found a new twist, one that “hurts” parental retirement savings.
The L&G study found that one in five U.S. homeowners received gifts or loans from family to help them buy their home “supporting the purchase of $317 billion worth of property across America in 2018.” The study states that if BoMaD were a real lender, it would be the seventh largest in the United States. In fact, the total amount loaned out by BoMaD is estimated to be $47.3 billion, just less then fifth-ranked U.S. Bancorp.
The average sum given as a gift or interest-free loan is $39,000 per loan. Parents are “giving until it hurts — putting off retirement or accepting a lower standard of living in their golden years to help the next generation,” the study finds. This amount doesn’t include other loans or gifts, usually dealing with college. Those loans averaged roughly $41,500.
continue reading »
