Buying a New Home

Key Considerations for Buying a New Home

Purchasing a new home is a milestone. Considering your home purchase decisions in the context of your other financial goals, including tax efficiency, and asset protection, can support your family’s long-term priorities.

Financial strategies & wealth planning

Strategic planning ensures that your home purchase not only meets lifestyle needs but also integrates seamlessly into a well-structured financial plan. As you prepare to purchase a home, consider:

• Your financing options. While purchasing a home outright may be a viable option, many wealthy homebuyers turn to strategic borrowing to fund their purchase. Securing a mortgage could provide tax advantages and preserve liquidity for other investments. For more on securing a mortgage, review Important Things to Know About a Mortgage. On the other hand, a cash purchase can avoid interest costs that would come with a loan.
• Interest Rates. If you use a mortgage to purchase your home, interest rates are an important consideration. Higher interest rates mean higher monthly payments and increase the total amount you will pay over the life of the loan. Lower interest rates reduce monthly payments and the total cost.
• Your cash-flow plan. Ongoing costs may include property taxes, homeowners’ association (HOA) fees, and maintenance. As a general rule home maintenance costs and repairs will be at least one percent of your home’s value each year. Speak with your Goldman Sachs team to ensure your home purchase fits into your cash-flow plan without limiting liquidity for other investments opportunities.
• Your insurance needs. Consider the level of home insurance you will need before purchasing a home. Also revisit or consider securing umbrella coverage—particularly if your home includes features that may present risk (such as a swimming pool).

Tax, estate, and asset protection planning considerations

Strategic planning can help minimize tax liabilities while safeguarding real estate holdings for future generations.

Consider ownership structures such as trusts or LLCs for asset protection, estate planning, and privacy. Holding a home in a revocable or irrevocable trust can protect the asset from lawsuits and estate tax liabilities. If the property is part of multi-generational planning, ensure it aligns with gifting and estate tax strategies.

You can also consider using a qualified personal residence trust (QPRT) for a long-term family asset, though purchasing with this ownership structure may mean making an outright purchase instead of using a mortgage. This type of trust allows homeowners to transfer their primary or secondary residence to a trust, retain the right to live in it for a set period, and potentially reduce estate and gift taxes when transferring the property to beneficiaries.

Location and market conditions

When deciding where to purchase a home, high net worth individuals should carefully evaluate several key factors. These include property value trends, tax implications, and insurance needs for natural disasters, as well as the long-term appreciation potential and market stability.

It's also important to consider development plans and zoning regulations, which can impact the future value and usability of the property. Proximity to high-quality schools and healthcare facilities may be another crucial factor, depending on your priorities.

The right home for your family can provide security and be a part of your long-term wealth strategy. By structuring the purchase strategically, optimizing tax benefits, and aligning the property with broader wealth preservation and estate planning goals, your real estate investment can be both a lifestyle asset and a financial advantage.

Important Things to Know About a Mortgage

Loans come in various structures, each serving different financial needs. Wealthy individuals often borrow strategically to preserve liquidity, optimize investments, and enhance tax efficiency. The approach maximizes financial flexibility and long-term management.

Types of loan structures

Fixed-rate mortgage loans

• Structure: Usually issued with a repayment term between 15 and 30 years and offer a fixed interest rate.
• Best suited for: Homeowners who prefer stability, want to lock in a low interest rate, and plan to stay in their home for a long period of time.

Adjustable-rate mortgage (ARM)

• Structure: Fixed initial interest rate for a specified period, after which the interest rate on the outstanding balance resets periodically based on the current interest rate at that time.
• Best suited for: Buyers who may be expecting to sell their homes within a few years or believe interest rates may fall in the future.

Interest-only mortgages

• Structure: Allow a borrower to pay only interest for a set period, typically 5‒10 years. At the end of that time, the entire principal of the loan is due.
• Best suited for: Buyers with high investment returns or fluctuating income.

Jumbo loans/mortgages

• Structure: Exceed the lending limits set by Federal Housing Finance Agency (FHFA).
• Best suited for: Buyers purchasing high-value properties that exceed conventional loan limits.

Speak with your Goldman Sachs team if you wish to consider a jumbo loan as it may be risker for lenders and requires stricter qualifications.

Portfolio mortgage

• Structure: For high value properties, these loans offer flexibility—often with bespoke customized qualifying guidelines—and alignment with privacy needs.
• Best suited for: Buyers purchasing high-value properties with a desire for flexibility and privacy.

Portfolio loans

• Structure: These loans are retained by their originator instead of sold.
• Best suited for: Buyers who are self-employed, real estate investors, or those with unique financial situations. This loan is unique as it allows the lender to set their own terms, which may be more flexible than a traditional mortgage.

Interest rates

Interest rates play a critical role in the affordability of a home and the overall cost of a mortgage.

The impact of periods of higher interest rates include:

• Increased monthly mortgage payments
• Less competition for buyers
• More stable housing prices
• Difficult loan qualifications

The impact of periods of lower interest rates include:

• Increased buying power
• Lower long-term costs
• Easier loan qualifications
• Lower monthly payments, allowing buyers to afford larger homes with the same budget

Tax implications

• If you itemize your tax deductions, you may be able to deduct your mortgage interest. Work with a tax advisor to maximize mortgage interest deductions.
• Review the property tax rate in your area to understand how it will impact your monthly payment.
• Identify any potential state and local tax deductions or credits that might be available to you.

Consider the impact to your cash flow

• Update your monthly budget to account for home-related costs, including property taxes, HOA fees, maintenance, insurance, and security costs.
• Reconsider how much liquidity you want to keep available. If you need to move savings or investments, talk with your Goldman Sachs team.
• Consider the pros and cons of a cash purchase, strategic use of debt or funding with margin (short-term).
• Discuss which entity should fund the purchase and ownership structure (who will “own” the house). Different ownership structures offer varying levels of privacy and financial protection.

Work with professionals to ensure a smooth transaction

• It’s advised to review loan terms, fees, and closing costs with your financial advisor, real estate agent, and tax advisor before making the final decision on your home.
• Consider speaking with your lawyer before signing any legal or financial documents to avoid any risks before and after the sale.

A mortgage is a significant financial commitment, and understanding its terms and conditions is key for helping you make an informed decision. By conducting due diligence ahead of the buying process, buyers can maximize value, minimize risk, and maintain a long-term wealth strategy that works for their family.

Strategies to Fund and Structure Your Home Purchase

This article explores the various strategies you can use to fund and structure your home purchase, highlighting key benefits and considerations of each approach.

Ownership structure

Buying a home through a trust

Buying a home through a trust allows you to ensure privacy, protect your assets, and facilitate estate planning.

• The trust, rather than the individual, is listed as the legal owner, keeping personal information out of public records.
• Trusts can shield the home from lawsuits, creditors, and divorce settlements. However, some lenders may be hesitant to provide a mortgage for a home owned by a trust, requiring additional structuring or guarantees.
• A home placed in a trust can be passed on to heirs without the delays and costs of probate.
• Depending on the type of trust, there may be tax advantages, such as reducing estate taxes.
• The trust itself can buy and hold the property, ensuring long-term protection and estate planning benefits.

Renting a home purchased by your family members

If your family would consider purchasing your home and renting it back to you, here are some ways to structure the arrangement that you may want to discuss.

• A lease agreement
• Fair rental terms
• Tax implications
• A plan for future ownership transfer if your long-term goal is to gain ownership of the property yourself

Funding your purchase

Using trust assets for a home purchase

If you’re a beneficiary of a trust, purchasing a home using trust assets can be a tax-efficient and strategic way to manage wealth. However, the process depends on the terms of the trust and the discretion of the trustee.

• If the trust permits, beneficiaries can receive distributions to fund a home purchase.
• In some cases, trusts can be used as collateral for a mortgage, allowing beneficiaries to finance the home while keeping assets invested.

Receiving a gift for your home purchase

One of the simplest ways for parents to help their children purchase a home is by gifting them cash — whether for a down payment, the full purchase price, or something in between. While this strategy can be a great way to provide financial support, there are important tax rules, lender requirements, and potential future implications to consider.

• Consider speaking with your Goldman Sachs team to help facilitate this conversation. They can help you review some of the important details to keep in mind.
• Under IRS guidelines, your parents can gift you up to $18,000 per recipient and $36,000 for married couples without triggering gift taxes. If your parents exceed this limit, you may need to file a gift tax return.
• Consider asking your parents for a traceable method, once they gift you the funds to purchase your home. A traceable method can be a cashier’s check.
• Review mortgage lender restrictions as some lenders may have guidelines about how gifted funds are used, especially regarding down payments.

Securing a mortgage

Wealthy individuals often borrow strategically—not out of necessity, but to preserve liquidity, optimize investments, and enhance tax efficiency. The approach maximizes financial flexibility and long-term management. Loans come in various structures, each serving different financial needs.

• Consider the impact on your credit score and financial obligations.
• Evaluate the interest rates and terms to ensure they align with your financial goals.

Family Member Co-Signers or Guarantors

There may be benefits to having a family member co-sign or be a guarantor on the loan, including more favorable terms or access to a greater loan amount. Keep in mind:

• Both you and your family member will be responsible for the loan.
• In a co-signing agreement, both individuals are treated as primary borrowers.
• In a guarantor agreement, your family member agrees to take responsibility for the loan if you as the primary borrower default.

For more on different types of home loans, review our article Important Things to Know About a Mortgage.

Demystifying the Home Purchase Process

The process between making an offer and officially closing on a home can be complex, requiring careful attention to financial, legal, and logistical details. This isn’t a journey you have to take alone. During the home buying process, you will typically have a team of professionals to assist you, including your personal real estate attorney, real estate agent/broker, lender, accountant, financial advisor, insurance broker, home inspector, and appraiser.

Even with the help of your team, understanding what to expect before closing can help you avoid surprises and ensure a smooth transition into homeownership.

Here are five steps to help you navigate the time between offer and closing, along with key considerations for each step.

Finalize the purchase agreement

• Once your offer is accepted, review the purchase agreement carefully, ensuring it includes contingencies for financing, inspections, and appraisal.
• Consider having a home inspection contingency in the contract, allowing you to negotiate repairs or withdraw the offer if significant issues arise.

Secure financing and lock in your interest rate

• If you’re using a mortgage, finalize your loan application and provide necessary documentation.
• If interest rates are on the rise, securing a low interest rate early in the process can protect you against market changes. If it looks like rates may fall, speak with your lender about options to preserve your flexibility.

Complete a home inspection and appraisal

Home inspection laws may vary depending on the state, but a home inspection is always a good idea. Home inspectors can identify and flag:

• Health and safety concerns like asbestos, mold, and lead paint
• Visible signs of damage or defects, including water damage, structural issues, roof damage, plumbing, or electrical problems
• HVAC condition

Your home inspector will not assess the value or your home. That happens through the appraisal process. A home appraiser will assess the value of the home by reviewing the physical property and conducting a market analysis. This process is done to ensure that the value of the home supports the purchase price.

Prepare for closing costs and final walkthrough

• Conduct a final walkthrough to check that all agreed upon details, such as the removal of the seller’s personal property, are to your satisfaction.
• Ensure funds are ready for closing costs and talk to your lawyer and real estate agent to coordinate your payments. Typically, a certified check is required, though a wire transfer may be acceptable.
• You should receive the Closing Disclosure at least three business days before closing by law. Take the time to read the Closing Disclosure closely and be sure to ask your lender, personal real estate attorney, or agent any questions you have.

Close the deal and take ownership

Attend the closing to sign all necessary documents, transfer funds, and receive the keys to your new home.

Closing on a home is an exciting milestone. These key considerations can help you navigate the process smoothly, avoid unexpected challenges, and confidently step into homeownership.

Understanding Closing Costs

When you purchase a home, you will incur some one-time closing costs. These include certain services, taxes, fees, and insurance costs needed.

Here are some of the costs you can expect:

• Appraisal: fees paid to a qualified professional home appraiser to determine a property’s market value.
• Home inspection: fees paid to a qualified professional inspector to evaluate the condition of a property before purchase.
• Home title searches: fees paid to a professional who ensures the title for the home is clear of any liens or discrepancies.
• Processing and filing: fees paid for reviewing and processing legal and financial documents and requests. These fees are charged by state and federal government agencies.
• Attorney: fees paid for the legal matters associated with real estate transactions.
• Escrow funds: an agreed amount held by a third party until both the buyer and seller have fulfilled their contractual obligations.
• Real estate transfer taxes charged by the county and/or city: a one-time tax or fee imposed by a state or local jurisdiction upon the transfer of ownership when a home is purchased.
• Real estate agent commission: a fee typically based on a percentage of the home sale price paid to an agent but can vary depending on location and negotiation.

The closing disclosure statement details all of the final costs and payments associated with your home purchase.

Estimated closing cost percentage

Closing costs typically range between 2% to 6% of the home’s purchase price. The total percentage can vary based on several factors, including the location, type of loan, lender fees, and whether the seller contributes to closing costs.

Understanding closing costs and planning for them in advance can help avoid last-minute surprises and ensure a smooth home-buying experience. If you have questions about how to navigate your closing costs or home purchase, connect with your Goldman Sachs team.