The surge in home prices since the pandemic has made it almost impossible for first time buyers to get into the real estate without help. It’s not surprising that parents are stepping in to help their children make their home owning dreams come true.
“Home buyers relying on a wealth transfer from their parents in order to purchase a home is becoming the norm in Canada,” CIBC report June 25, 2024. The report goes on to say that 31% of home buyers received financial help from their families compared to 20% in 2015. There are several different options for families to help one another with buying a home.
Co-signing a mortgage is one such option. Co-signing a mortgage is a big responsibility. You are basically becoming a co-owner, you are buying the home alongside the primary buyer. To qualify as a co-signer, your income, debt, and credit scores will be closely examined to determine whether or not you would have the ability to pay off the loan if need be.
Becoming a guarantor is another possibility. You are not responsible for the loan, you are just vouching that you will pay it back on time. A guarantor is only responsible for the loan if it goes into default.
Paying for some or all of the down payment is an option for some parents. Even bringing down the mortgage enough to shield your kids from having to pay for the CMHC insurance can make home buying an option for some.
A bridge loan can help children who are up-sizing their home if their new mortgage is conditional on having their home sold by the closing date.
The loan of the 5% deposit needed within 24 hours of signing a purchase agreement can be a huge help too.
Help with the other costs of buying a home like closing costs, land transfer taxes and legal fees are also ways you can help your kids become homeowners.
My parents can let their kids live with them rent free or put the rent they are charging towards a down payment fund.
We all want what’s best for our children & there are lots of ways we can help them big and small. Please feel free to contact me in complete confidence about how to help your children make their home owning dreams come true.
This information should not be relied on as legal advice, financial advice, or a definitive statement of the law in any jurisdiction. For such advice, please consult your own legal counsel, financial representative or insurance representative.
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