Emptying the Nest: How Parents are Helping their Kids Buy Homes

Have the means to help your children realize their dreams of homeownership in today’s market? There are ways and reasons to help with the down payment, giving your children a step onto the property ladder.

This generation is seeing young, professional adults take longer to the leave the parental-nest and set up a home of their own. Whether it is because of student loans they are trying to pay back or a lack of savings but a strong professional job, saving the 5% minimum down payment amount seems to be taking them longer in this pricier real estate market.

“For many boomers who, through modern healthcare and better habits, have been given a second chance at a teenager’s existence (albeit with more money and less mobility), their kids are definitely cramping their style.”

If you find you are in a position to assist your children with a lump sum of money for the purpose of purchasing a home, there are some good reasons why:

1. It makes sense for tax reasons: There is no gift-tax associated with the transfer in Canada and by transferring this amount to your children now it will result in less estate-tax owed when the time arrives.
2. It makes sense for legacy reasons: Maybe you don’t want to give your children straight cash to spend freely. By gifting an amount towards the down payment of a home, you have control over where the money goes and, in this case, towards an appreciating asset.
3. It makes sense for legal reasons: When helping your children buy a home there are really two ways to do so- providing some cash for down payment or co-signing/ guaranteeing the mortgage. The latter opens you up to accountability and financial consequences if the mortgage is not paid which may put your financial future at stake.

Gifting the down payment, or part of, is relatively simple. You sign a letter stating the amount you are providing and that there is no obligation for re-payment. Lenders will most likely want to see the funds deposited into your children’s account and, in some cases, your account statements showing the funds are available. If your children have some savings as well they can add their own contributions and the entire amount will be used as down payment.

See the Canadian Mortgage Trends article here and ask your trusted Mortgage Broker for more information.