With skyrocketing property prices across Quebec, many parents are concerned for their children. When they are ready for this next step, will they have the financial means to buy a residence? How can a parent plan so the next generation can access homeownership?
No one can predict the future, but there are things you can do to assist your kids in becoming property owners. And you can start when they’re teenagers! If your children are already adults, other options can be equally helpful. Here are some ideas.
Live Together for a Few Years (Prepurchase)
If house values have increased, so have rents. It can be hard for young adults to save towards a down payment. So why not invite your child to move back home for a couple of months, or years, to allow them to economize?
If you know they’re a bit of a spendthrift, you could even ask that they pay you rent, the amount of which you will deposit in a savings account or a TESA to grow their money for them.
Co-Sign the Mortgage
If you are willing to assume some financial risk, you might want to consider co-signing the mortgage. But first, you should make sure your child can afford everything else that comes with homeownership (taxes, condo fees as applicable, electricity fees, mortgage payments, etc.).
In this way, your child (with or without a spouse) can become a property owner despite not having a very large down payment. Be aware that being a co-signer means you are just as responsible for the loan as your adult child. If they can’t manage to pay the mortgage, the lender will turn to you.
Suggest That Siblings Buy Together
A first home doesn’t have to be perfect. In fact, it can simply the initial rung in climbing the real estate ladder. With this in mind, propose this savvy solution: that your two (or more) children purchase real estate together.
They are more likely to obtain financing with two incomes and their monthly budget won’t be so tight. When they resell in a few years, they will each end up with a good-sized down payment.
Offer Love Money
You must have considered it already: gifting your children money or loaning it to them interest free is an excellent way of helping them become homeowners. In the case of a cash donation, the lending financial institution will require a notarized “gift deed” confirming that the money is a gift and not a debt your child will need to pay back.
As for a loan, have a legal document prepared stating all terms and conditions, such as any interest or if it is subject to monthly reimbursement. This will avoid any conflict between parent and child!
Purchase the Property to Rent It to Your Child
If you have the financial means, another solution is to acquire a house yourself and rent it to them under a rent-to-purchase agreement. For this option, it is best to be sure your child can afford to pay all the fees. Moreover, you can set their rent low initially and raise it as their salary increases.
Buy a Duplex
This solution may seem unconventional. Indeed, why spend more on a property than you would to purchase a single-family home or a condo? Because the rental income from a duplex might cover all expenses, or at least most of them. Of course, this option requires a larger down payment and parental assistance may be necessary.
All these solutions are a sure way of ensuring your child becomes a property owner despite the overheated market. If your child is still a young teenager, consider teaching them to be financially responsible with a credit card they have to reimburse in full each month to avoid paying interest. In this way, they can learn the value of money while “building their credit” with banking institutions.