As homes in Calgary get more expensive it becomes harder for young professionals and families to buy a home, which is why many parents are stepping in to help their kids buy now 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 cosign for the mortgage. Regardless of the level of involvement a parent has in their children’s home buying experience, here are the top three ways a parent can help out.
Help with the down payment
Many parents choose to help their children with their down payment either in full or in part. Motivations for this include helping their son or daughter avoid CMHC premiums or helping them accumulate the required down payment faster. When the minimum down payment on a $400,000 house is $20,000, some assistance saving for the down payment is often necessary, especially for those in their early 20’s.
In some cases parents provide the down payment as a wedding gift or an early inheritance. Whatever the motivation, assisting with the down payment is a great way to help your adult children buy a home.
Cosign for the mortgage
With mortgage rules tightening on an almost a yearly basis, many young adults are finding that they no longer qualify for a mortgage even though they can afford to pay for one. In Alberta, where being a self employed or contract worker 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 cosigner.
Cosigning for a child who cannot afford a mortgage or who has been careless with their credit, on the other hand, may not be a wise decision given that a cosigner 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 their positive and negative experiences can be invaluable.
Furthermore, helping your son or daughter connect with a good REALTOR, mortgage broker, lawyer and financial advisor also makes a world of difference. In the age of the internet it is far to 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.
