3 Options for Helping Your Child Buy a Home

You can help your child buy a home if they cannot afford one on their own. Below are some options for extending this help.

1. Pay the Down Payment

If you have the money, gift it or lend it to the kids for the down payment money. Note that with this option, the child has the right to sell the property if they wish.

A down payment of 20% is common, but you can go lower or higher than that, depending on your circumstances. Bear in mind that lower down payment is difficult to qualify for, available from a few lenders, and triggers high-interest rates. On the other hand, a higher down payment attracts reasonable interest rates, strengthens the purchase bid, and ties up your money.

Analyze your financial status and give the kid whatever you can afford. As of 2020, you can gift your child a maximum of $15,000 without taxation. Your partner can also gift a similar amount. Thus, you can gift the child a maximum of $30,000 without taxation.

2. Become a Co-Owner

Another option is to buy a house with the child and become a co-owner. As a co-owner of the property:

• Your name will be on the property title
• The purchase will affect your credit rating
• You become responsible for the mortgage payments
• The child cannot sell the property without your consent  

Property co-ownership is not a simple matter. Come up with an agreement that determines:

• How you will manage the house's costs of ownership
• What happens to the house if one person dies
• How either of you can get out of the co-ownership

Ensure the agreement is legally binding to avoid future controversies.

3. Buy a Multi-Unit Home

You can also buy a multi-unit home and bestow one of the units upon your child. This option works best if you don't have a home or if you are looking to upgrade or downgrade. In this case, you handle the purchase just as you would any other property purchase. Your name will be on all the relevant papers, including the mortgage application.

Consider all the pros and cons of multigenerational living before taking the plunge. For example, multigenerational living can save you money and bring your family closer. On the other hand, the setup might expose you to compromised privacy and constant noises.

The above are not the only options available. For example, you can even finance the purchase for the child. Talk to a RE/MAX broker for further information.