How Can You Help Your Kids Buy A House?

04 May of 2015

It’s certainly not uncommon for parents to want to help their children navigate the world and make things a little easier for them.  One of the ways this happens is by parents helping their kids buy a home.  Most of the time it’s the first home for the kids, and their parent’s help is what makes it all possible.

Naturally, opinions vary on this topic as some people believe it is their duty to help their children and some believe their kids should do it alone.

There really is no concrete should or shouldn’t when it comes to helping out kids with buying a house.  It is an opinion based on personal beliefs and most likely your own financial situation.  If you’re among the group that doesn’t believe in helping your kids buy a house, then this article isn’t for you.  If you do want to help, keep reading.

Ways to Help

Some of the common ways parents help their kids buy a home include:

  • Giving cash for a down payment.

  • Co-signing on the mortgage.

  • Purchasing a home with your own money or home equity, and have your child rent it from you in a rent-to-own scenario.

Each one of these methods has its pros and cons, and often it’s more a matter of what the child needs in order to make it all happen successfully.  If they have the income to make the monthly payments but don’t have any upfront cash, parents may help with a down payment.

If they don’t have the necessary income or their credit score isn’t where it should be, then parents might co-sign.  It’s important to keep in mind that co-signing means the parents are on the hook if the kids can’t make their payments at any point during the mortgage.

Buying a home and then renting to the kids is a bit of an extreme way to help, but it might work better than co-signing for some people.  This way, the parents have more control over that property than if they’d just co-signed.  Also, if the kids end up shirking their rental responsibilities, they can always rent to someone else.

Think It Through Carefully

Helping your kids out with buying a home should never just be a “no-brainer.”  It’s important to think the situation over very carefully, so you know that you’re making the right financial decision.  Go through all the possible scenarios so you know you’ll have enough money for your own retirement should something not go according to plan.

If you are thinking of this project as an investment, it’s a good idea to consider the fact that real estate prices likely won’t continue to rise the way they have in recent years.  Sooner or later, things will slow down or the bubbles will burst and the environment will change completely.

That’s not to say helping is the wrong decision. Just take the time to consider all the possibilities before you hand over a down payment or co-sign a mortgage. Take advice from a mortgage broker in Toronto if needed.

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