• Millenials Are Buying Homes: The Bank of Mom and Dad

    February 11, 2020
  • Bank of Mom and Dad: Changing the Way Millennials Are Buying Homes

    Younger Canadians and millennials have been hit especially hard by the rising home prices, which has diminished their appetite for home ownership. This has had spillover effects in the Canadian society. The most common traits is that the kids are staying at home for longer. Doing so has helped in many ways:

    • Helps build their career
    • Allows them to pay off debts
    • Save for a down payment
    • Help parents around the house (shoveling, cutting the lawn, etc.)

    Last year, 37% of First-Time Home Buyers received a gift. Proper planning is so important when considering a gift to your kids and we will outline a thought process in considering this generous and kind offer.

    It all starts with the parent(s). Are they okay for their own retirement needs? This must include costs for potential long-term care needs. Parents must consider if this is a gift or a loan. It is our experience that most are true gifts. The great benefit of the gift of cash is that it is tax-free. More importantly, they treat it as an early inheritance and get to take in the home-ownership while still alive.

    Other areas to consider for parents is whether it is for one of their kids getting married. We had a situation in our Hamilton office where parents gifted $100,000 to the newlyweds for their first home. Unfortunately, the couple decided to go their separate ways. The wife in this case received half of the equity. Needless to say, the parents were distraught over the outcome. Today, parents are protecting themselves by issuing a demand loan for the amount gifted. There is no interest and payment on the loan, however, if the marriage fails, the parents would demand their loan back and protect their interest.

    Parent(s) need to also think about whether the kids are ready for home-ownership. Jumping from living at The Parent’s Hotel to their own roof is not an easy transition. There is a big adjustment both physically and financially when millenials are buying homes.

    As long as prices remain high, look for the Bank of Mom and Dad to continue in helping the young purchase their first home.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

    If you would like to apply for a mortgage online, please follow this link.

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