Purchasing a home might be a dream for many, but the financial burden that comes with it isn’t feasible for everyone. When adults want to secure a home in the early stages of their career, they often turn to their parents for financial help.
The rising house prices in Canada have made it more challenging for future homeowners to invest in a property. A survey conducted by Abacus Data on behalf of the Ontario Real Estate Association (OREA) revealed that around 40 percent of parents of young homeowners helped their children financially when they purchased the property. There are a few ways parents can assist their adult kids in the homebuying process.
Provide a Mortgage Gift Letter
If your kids don’t have sufficient funds to cover the down payment for their new home, you can help them by providing a mortgage gift letter Canada lenders accept. A mortgage gift letter is a document declaring that you’re giving your children the funds as a gift with no obligation to pay it back.
Mortgage lenders who provide the funds for an individual to purchase a home want to ensure that the buyer is financially capable of repaying the loan. A mortgage letter shows them that their financial burden will be lower with monetary help from a family member. But, your kid would still need to show the lender that they can handle monthly payments with their income and good credit score.
Co-Sign The Mortgage
You can assist your adult kid by co-signing the mortgage to increase their chances of getting approved when preparing to get a mortgage. The lender will take your income and credit history into account and your kid’s, so both of you must be financially capable of taking out a mortgage.
If your child is late with payments, you’ll be responsible for making those payments. However, the benefit of co-signing the mortgage is that you will also be the asset owner and not just have liability.
Loan Your Kids the Money
If you don’t want to gift your kids the money, as it can become a financial problem for you in the long term, you can loan the funds. You can decide how much money you want to loan them and create a mutual agreement about the payback terms. It might be helpful to draw up a contract outlining the terms to avoid confusion or problems in the future.
Help Them Non-Financially
It’s not always possible for parents to financially help their children buy a home. But, you can help them in other ways. You can help them with house hunting to ensure they find a suitable home, or if you’re handy, you can help them with renovations to save costs.
Another way you can help your kids is by providing contacts for real estate or mortgage agents. Helping them build connections can speed up their buying process.
Buying a house as a young individual can be challenging, but you can offer your support to your children in many ways.