Affordability of homeownership is a challenge for young people, but there are different options to help your child buy their first home.
However, before making a decision, it is important to discuss your financial situation with an expert in the field and consider fairness in your estate planning to avoid family friction.
As a real estate broker, I recommend that you begin your search by evaluating the properties available on the South Shore, an area that offers an exceptional quality of life with its numerous parks and green spaces, its renowned schools, its local businesses and its cultural and sporting activities. You can also consult my properties for sale page or do business with me as a real estate broker who knows the South Shore real estate market well and who can help you find the ideal property for your child.
Here are some options to consider to help your child access homeownership:
- Endorsement: By endorsing your adult child, you become co-owner of the house they are purchasing and are jointly and severally responsible for the loan. This can impact your own debt-to-income ratio and credit score, which can thwart your future real estate plans.
- Gift of money: You can make a gift of money to your child without tax impact. It is important to check the tax impacts of this decision in the event of a capital gain when cashing out an investment or selling a property. Put your gift in writing and see to it that your will is modified for a fair future distribution between the heirs.
- Money loan: By choosing this option, you could take the purchased property as collateral. However, remember to clarify certain points in a legal document, such as repayment terms, interest rate, what will happen in the event of your death, changes to your estate, etc. If the loan gives you interest, you will have to declare it for tax and your child can only deduct it if they buy an income property.
- Gift of Equity: It is possible to transfer your house to your child at an attractive price. However, this decision may result in tax costs if the transferred home is not subject to the principal residence exemption. Also, if your house is not fully paid for, a dependent donation is still possible provided that your child takes care of the mortgage.
- Support with his finances: If your own financial situation does not allow you to help directly, you can offer support in other forms, such as housing him after his studies so that he can accumulate a good down payment, guide them to have a strong credit score, or encourage them to reduce their debts and expenses.
