ARE YOU A PARENT HELPING YOUR CHILD BUY A HOME?

Vanessa came to us in late 2020. She was referred by her sister who had come to our office to help manage her mortgage. Unlike her sister, Vanessa was not married and had not established herself in a career. 

Vanessa had a single income and a relatively new position with the Hamilton Board of Education. Teacher salaries grow each year until they reach their final grade. Our client was on the low side of her pay grade but she did have a good down payment and excellent credit. She was eager to have her own home, but Vanessa’s offers were consistently outbid. As time continued, home prices soared and her affordability for her home price and style started to get away from her. 

Earlier this year, after 7 offers, Vanessa had an accepted offer. Normally this is where the story ends. However, her purchase price made me really nervous. In fact, my heart started beating rapidly. She bought a home with a price she could not afford. It was a call I dreaded. Fortunately, it was an easy call. Vanessa had prepared expertly and the down payment gap was filled with a generous gift from the parents. 

Was this UNIQUE? It is actually becoming the norm! And given the high home prices, we believe this will continue. 

ARE YOU CONSIDERING CO-SIGNING WITH YOUR KIDS?

If you are a parent and considering helping your kids to co-sign, please do not proceed until talking to Robert and Sean. They will provide invaluable information to save taxes and the information comes with NO obligation. 

REASONS PARENTS WILL CONTINUE TO ASSIST THEIR KIDS

Demographic: the baby boomers are both dying and retiring. This will have a huge wealth transfer to their heirs. 

• Parent are now thinking to help their kids while they are living. 

• Home prices have escalated so rapidly, as the kids incomes have fallen behind. 

New obstacles have arisen such as these mortgage guidelines: 

Stricter lender underwriting

New Canadian Mortgage Stress Test (currently 5.25%)

Parents realize that no home ownership will exist for kids without their
assistance

In 2015, 20% of first time homebuyers had parents’ help

In 2015, the average gift from parents was $52K

In 2021, 30% of first time homebuyers had parents’ help

In 2021, the average gift from parents was $82K

It appears to me that the trend will continue to grow over the coming years.