Buying a home can be challenging in today's market. And a lot of young people who are really eager to buy a home, are now finding it difficult to break into the market, with rising real estate and rent prices.
The cycle can be vicious. You want to build equity as a homeowner, but you need to first save enough money for a down payment and closing costs. But a big chunk of your income goes towards rent, so your savings are limited. What are young buyers to do?
For parents who are able to give their children a boost, we’d like to give you some ideas for how to help your children buy a home in Greater Victoria, and Vancouver Island.
- Parents who are in a good financial position can assist their children with finances. This could mean parents covering the mortgage for their children and charging very little interest on the home. The most common option, though, is parents providing their children with a gift to help with the down payment and legal fees.
- If the children have a less-than-ideal credit history, but can still afford to buy a home, parents have the option to co-sign the mortgage. This helps to improve their credit rating and be able to qualify for more in other areas of their life. Remember though, co-signing is a risk, and you need to have serious trust in your children to go this route because the parent is on the line.
- Another interesting option is to purchase a home as a parent and rent it back to the child at a rate that is much more affordable than they would find elsewhere. As time goes on, you can save their rent money and gift it back to them, while they use the additional cash they’ve saved while renting from you to purchase the home for themselves.
- Other times, children might just need a boost early on covering expenses. This could mean letting them live at home for a time rent-free, under the condition that they save their money relentlessly with minimal expenses.
- Another approach could also mean helping with legal fees, transfer taxes, closing costs, or moving expenses. The things that add up on top of the downpayment and mortgage payments can often be a barrier to homeownership.
All in all, there are many ways you can help your child purchase a home in Victoria in today's market. But always make sure you can afford it! Don’t be dipping into your retirement savings. Always keep your own self-interest in mind.
Having a Mortgage Professional that you can talk over the options and scenarios with you is invaluable, and I'd be happy to refer you to a trusted colleague if you have any questions!