The Homebuyer’s Corner
Can I Use My Home Equity to Help My Kids Buy a House?
Written by Armando Novelo, NMLS 237243, a mortgage loan officer in West Covina with over 20 years of experience helping Southern California buyers.
Yes. If you have built equity in your home, there are real and lender-approved ways to use it to help your children get into homeownership. A lot of parents in the San Gabriel Valley are sitting on significant equity right now, and one of the most meaningful things that equity can do is give the next generation a head start in a market that is increasingly hard to enter without one.
The right approach depends on your specific situation, your child's qualifying profile, and how much you want to be involved in the transaction itself. What follows is a light overview of the options that exist. The exact numbers and structure for your family are worth a conversation, not a formula.
A Cash-Out Refinance to Gift the Down Payment
One of the most common paths is a cash-out refinance on your existing home. You refinance your mortgage for more than you currently owe and receive the difference in cash. That cash can then be gifted to your child to use toward a down payment.
If your home has appreciated significantly since you bought it, which is the case for a lot of SGV homeowners who purchased five or more years ago, the equity available through a cash-out refinance can be substantial. The gift needs to be documented properly with a gift letter that satisfies the lender's requirements on your child's purchase loan.
The trade-off is that you are taking on a larger loan balance at today's rates, which increases your monthly payment. Whether that makes sense depends on your income, your current rate, and how much equity you have to work with. We covered how equity and cash-out refinancing work in detail in this article, in the section on when a cash-out refinance makes sense versus a HELOC.
A HELOC to Access Equity Without Replacing Your Mortgage
If you locked in a low rate on your existing mortgage and do not want to give it up through a refinance, a HELOC is worth understanding. A home equity line of credit lets you draw from your equity as needed without replacing your first mortgage.
The funds from a HELOC can be gifted to your child in the same way as cash-out refinance proceeds. The difference is that your original mortgage stays intact and the HELOC sits as a second lien on your property. You draw what you need, when you need it, and pay interest only on what you use.
This option works particularly well for parents who want flexibility, especially when the timing of their child's purchase is uncertain. The specifics of how much you can access depend on your equity position, your credit, and the lender's guidelines.
Going on the Loan as a Co-Borrower
Another option is for a parent to go on the child's loan as a non-occupying co-borrower. This means your income and credit profile are added to the application to help the child qualify for more than they could on their own income alone.
This is a bigger commitment than gifting money because your name is on the loan and the payment shows up in your financial obligations. It can affect your own qualifying ability for future financing. But for families where the child's income is solid but their credit or debt profile is still developing, it can be the bridge that gets them into a home now rather than years from now.
A Gift of Equity If You Own Property the Child Wants to Buy
If you own a property and your child wants to purchase it, there is a strategy called a gift of equity where you sell the home to your child for less than its appraised market value. The difference between the sale price and the appraised value is treated as equity in the transaction and can substitute for a down payment.
This is one of the cleanest ways to keep property in the family while helping a child get into homeownership without needing a large cash down payment. We covered how that works in full detail in this article, in the section explaining which loan programs allow it and what the lender requires.
The California Dream For All Connection
It is worth knowing that the California Dream For All shared appreciation program was specifically designed with first-generation homebuyers in mind. One of its qualifying criteria is that neither of the buyer's parents currently owns a home in California. If your child qualifies as a first-generation buyer and the program is open when they are ready to purchase, it may reduce how much help they need from you directly.
When it is available Dream For All provides up to 20 percent of the purchase price toward a down payment with no monthly payment. The current status of that program and what to do while it is closed is covered in this article, in the section on what to do right now while the program is closed.
Every Family Situation Is Different
The options above are a starting point, not a prescription. Whether a cash-out refinance, a HELOC, a co-borrower arrangement, a gift of equity, or a combination of approaches makes the most sense for your family depends on details that are unique to you.
How much equity do you have and at what rate did you buy? What does your child's credit and income look like? How involved do you want to be in the ongoing mortgage? What is the purchase price you are working with? Are there assistance programs your child qualifies for that could reduce how much you need to contribute?
Those are the questions worth answering before anyone touches an equity position or signs a gift letter. If you are a homeowner in the San Gabriel Valley thinking about how to use what you have built to give your kids a real shot at this market, that conversation starts with a phone call. Reach out to Armando directly and we will look at your specific numbers together.
Armando Novelo, NMLS 237243, is a mortgage loan officer at Super Mortgage Bros, powered by Golden Empire Mortgage. He has been helping Southern California buyers and homeowners since 2002. His office is located in West Covina, CA.
Article Published: September 1, 2026
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Armando Novelo
NMLS 237243
Super Mortgage Bros
1900 W. Garvey Ave S. #100
West Covina, CA 91790
Phone: (626) 200-1838
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