A generation of Canadians is experiencing a sharp shift in housing affordability, and many eager homebuyers are looking to the “Bank of Mom and Dad” for assistance in obtaining their first property.
While it makes sense for some parents to desire to give their children an advantage in the real estate market, providing a deposit or down payment can require parents to spend a sizable amount of their own money.
It’s crucial to have a strategy in place and make it known to your kids if you are able to assist them with purchasing a home, whether it be through a loan or a financial gift.
Here are some tips for doing precisely that:
Understand your own financial goals and needs
No matter how much you want to support your children, you should first make sure that doing so won’t put your own retirement or standard of living in danger.
You should think about your income, when you want to retire, how you want to spend your retirement, and whether you want to make big purchases in the future.
You should also think about the timing and tax implications if you want to leave your children money and you will need to liquidate investments or other assets to make it happen.
When to consider a gifted down payment
A “gifted down payment” occurs when a parent gives their child a particular sum of money intended to be used as the down payment on a house.
Usually, the giver of the present is required to sign a document clearly declaring that the funds are a gift rather than a loan and that they are not subject to repayment. The letter also contains information on the recipient’s relationship to the gift-giver, the date of the gift, and the amount of money given.
Check in regularly with your financial goals
It can be helpful to look at the big picture and create a plan so that you don’t lose sleep over your own future because you supported your kids. You can do this by talking with a representative from your financial institution, such as a TD personal banker, and by reviewing your financial goals on a regular basis. These discussions become even more crucial if your financial requirements alter over time.
Supporting your kids on their path to stability and financial independence can be done in a meaningful way by helping them purchase a home. You can equip your kids to successfully navigate the home-buying process by starting early, teaching them about money matters, helping them with mortgage research, giving them direction when they’re house searching, and offering them emotional support. Nothing makes a parent happier than to watch their kids realize their aspirations of becoming homeowners.
Learn more at https://newscanada.com/en/4-tips-for-helping-your-kids-buy-a-home-139022
Reference: https://newscanada.com/
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