Helping Your Kids Buy Property? Here’s What You Need to Know
According to recent statistics, only 33% of millennials in Canada are homeowners, despite the fact that 56% consider homeownership a top financial priority.
As the challenges of home ownership continue to grow for millennials in Canada, many parents are stepping in to provide financial assistance to help their adult children buy property. It’s no secret that the rising cost of real estate and the stricter mortgage rules have made it increasingly difficult for young people to enter the housing market. So, it’s not surprising that parents are looking for ways to assist their children in achieving their dreams of homeownership.
According to recent statistics, only 33% of millennials in Canada are homeowners, despite the fact that 56% consider homeownership a top financial priority. This disparity highlights the need for parents to step in and offer a helping hand. Providing a down payment is one of the most common ways parents assist their children in buying property. In fact, a 2019 study revealed that 37% of homebuyers received financial gifts or loans from family members.
Parental contributions often play a crucial role in enabling first-time homebuyers to make a purchase. However, it’s important for parents to thoroughly assess their own financial situation before offering assistance to their children. While the desire to help your children achieve their dreams is understandable, it’s essential to ensure that your own financial stability and retirement plans are not jeopardized.
One option that some parents consider is refinancing their own home in order to provide the necessary funds for their children. While this may seem like a viable solution, it comes with risks. Refinancing your home to help your children buy property means taking on additional debt and potentially extending your mortgage term. This can have severe implications for your own financial future, so it’s not a decision to be made lightly.
Parents must also decide whether their financial contribution will be a gift or a loan. If it’s a loan, it’s important to set clear expectations and terms for repayment. This can help avoid any misunderstandings or conflicts down the line. It’s also worth noting that being a guarantor on the mortgage is another way parents can help their children buy property. However, being a guarantor comes with its own risks and requires in-depth conversations with your child about their financial responsibilities.
Communication and clear expectations are essential in this process. It’s important to have open and honest conversations with your children about the assistance you are providing. This ensures that both parents and children have a realistic understanding of the help being offered and the expectations that come with it. It’s also worth considering your level of involvement in the homebuying process. Some parents may want to be more hands-on, while others may prefer to offer financial support and let their children navigate the process on their own. Discussing this early on can help avoid potential conflicts and ensure everyone is on the same page.
Ultimately, assessing your own financial stability and retirement plans is crucial before committing to helping your children buy property. It’s important to consider the potential impact on your own financial future and ensure that you are in a position to assist without compromising your security. While helping your children achieve their dreams is a noble goal, it’s important to make informed decisions and prioritize your financial well-being.
Many parents are helping their adult children buy property in Canada due to the challenges of homeownership for millennials. Providing a down payment, being a guarantor on the mortgage, or offering financial gifts or loans are common ways parents assist their children. However, it’s crucial for parents to assess their financial situation before offering assistance and to set clear expectations and terms. Communication and open discussions are key to ensuring that parents and children have a realistic understanding of the assistance provided. Finally, parents must consider their level of involvement in the home-buying process and carefully evaluate their financial stability and retirement plans before helping their children buy property.
Team GEMINI is not a professional estate planner. Readers are encouraged to speak with a licenced estate planner for financial and legal advice. This article is for general information only.
Post: Oct. 17 2023
