Can Canadians purchase a home without help from Mom and Dad?

Hoping to buy a home in today’s market? If so, you, like many other Canadians, may be wondering if it’s possible to do so without help from the “bank of Mom and Dad.” Parental financial support when buying a home used to be a bonus that some lucky home buyers would receive, but for most people it was not something to rely upon. Now, however, the majority of new Canadian buyers are doing so with assistance from their parents. So, if you are planning on entering the housing market, should you bank on needing help from your parents?

Why home-buying assistance is the new norm

Why are so many people turning to their parents for help when buying a house these days? There are a couple factors at play. First is the fact that the cost of living has skyrocketed over the years. Apart from housing expenses, it’s becoming increasingly costly to buy groceries, get gas, pay for childcare, and do pretty much everything else. These types of essential expenses are eating into money people may have otherwise put toward a down payment savings fund. 

There is also the reality that housing prices have increased at a rate that far outpaces income growth for many Canadians. Even for the most responsible and frugal people, the funds needed to buy a home often just aren’t there. The good news is that if you have strong credit and a solid income, many lenders are willing to work with you even if you need a boost from your parents.

How do parents provide support?

What are the ways parents can support a child buying a home? There are two main options here, and those are a gifted down payment, or co-signing a mortgage. 

Gifted down payments are pretty self-explanatory. This is when a parent gives their child money to contribute to or cover the cost of their mortgage down payment. This is the only involvement a parent has in the mortgage process, meaning they are not responsible for any other part of the home or mortgage. It’s important for the donor to understand that a gifted down payment is not a loan and they cannot expect repayment. Lenders need parents to acknowledge this so they can be confident the home buyer is not putting themselves into debt with another person.

A mortgage co-signer is much more involved in the homeownership process. By co-signing a mortgage, a person is agreeing to be held responsible for it. They are on the hook for keeping payments up to date and keeping the mortgage in good standing, just like their child. If the person they are supporting cannot make their payments, lenders will turn to them.

What are your next steps?

As the home buyer, what are you supposed to do? Our first recommendation, obvious as it may seem, is to accept help offered to you. Many people still have a strong belief in providing for themselves. While that is admirable, there is nothing wrong with taking help if it is offered to you! It is completely fine to accept financial assistance as long as everyone is comfortable and not putting themselves at risk. 

You should also take a long look at your budget before completing a home purchase. Make sure that any other expenses you have are factored into your budget, and do not clash with your mortgage. You don’t want to add to your financial stress once you have a home! When you meet with your mortgage broker, be sure to discuss all your expenses so they can paint an accurate picture of your situation.

Contact your mortgage broker today

Whether you have parental assistance or not, working with a mortgage broker is the most important first step when buying a home. If you do plan on receiving help from a parent, we can walk you through your best options in terms of gifted down payments, mortgage co-signers, and how your parents can best support you. If you are trying to buy a home on your own, we are ready to help you talk strategy. The sooner we get in touch, the more options we can explore. You might be able to take advantage of first-time home buyer incentives, or we can discuss the best ways for you to save.

Buying a home might be trickier today than it was in the past, but that does not mean it is impossible. An important first step is determining if you will have help, or if you will be entering the market alone. This will shape our strategy moving forward. We work with buyers in all types of situations! Reach out to us today so we can start discussing what homeownership looks like for you.

If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.