Assisting your offspring with an address of their own
As homes in Calgary get more expensive, it’s becoming harder for young professionals and families to buy a home. As a result, many parents are stepping in to help their kids buy before prices go any higher. There are many ways to help your children when it comes to buying a home. Some parents go as far as purchasing a house outright for their kids and renting it back to them. Others provide down payments in the form of a gift or co-sign for the mortgage. Regardless of the level of involvement, here are three ways a parent can help:
Help with the down payment Many parents choose to help their children with the down payment either in full or in part. In some cases, parents provide it as a wedding gift or an early inheritance. The motivation behind helping with the down payment varies. Some do it to help their sons or daughters avoid Canadian Mortgage and Housing Corp. premiums, others, to help their children accumulate the required down payment faster. Either way, some assistance is often necessary when the minimum down payment on a $400,000 house is $20,000. Whatever the motivation, assisting with the down payment is a great way to help young adults buy a home.
Co-sign for the mortgage With mortgage rules tightening on an almost a yearly basis, many young adults are finding they no longer qualify for a mortgage even though they can afford to pay for one. In Alberta, where being self- employed or contract is becoming the norm, job tenure can easily become an issue when applying for a mortgage. This is where a parent, with great credit and a good income, makes sense as a co-signer. That said, co-signing for a young adult who cannot afford a mortgage or who has been careless with their credit, on the other hand, is not a decision to be taken lightly. It’s important to remember the co-signer has the same obligations to repay the loan as the primary applicant.
Give great advice The best thing a parent can do to help their son or daughter buy a home is to provide great parental advice. A parent who has been through the home-buying process, and who is willing to share both his or her positive and negative experiences can be invaluable. Furthermore, helping a young adult connect with a good REALTOR®, mortgage broker, lawyer and financial adviser makes a world of difference. In the age of the Internet, it is far too easy for a young adult to get sucked into a low-rate mortgage that comes with all sorts of hidden fees and penalties. Some timely advice from a savvy parent can save a lot of headache down the road. Your kids will thank you – some day.
Nolan Matthias holds a Bachelor of Arts Degree in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. www.mortgage360.ca