If you’re a homeowner who recently purchased a new pad in the West Shore with a little financial help from mom and dad, you’re not alone.
More first-time homebuyers are turning to their parents to help with a downpayment on a home, according to a new report by the Society of Notaries Public of B.C.
The fall real estate report, an internal online survey of members from across the province of key real estate topics in November, found half of notaries’ first-time homebuyer clients are typically getting help with their downpayment from their parents.
On Vancouver Island, approximately 60 per cent of local clients receive parental support, with 37 per cent of parents funding less than 25 per cent of the downpayment, 44 per cent funding 25 to 50 per cent and 19 per cent funding more than half of the agreed upon downpayment.
Roughly 72 per cent of parents are gifting the money and seven per cent of parents are going on title with their children.
According to notary Morrie Baillie, at least half of her first-time homebuyer clients are receiving financial help from their parents for a downpayment.
“It just depends on each family situation and how they craft or devise a plan that makes sense for the family,” said Baillie, adding some parents are going on title with their children, some are providing a second mortgage and some are coming to the table as a guarantor.
“In order to enter the marketplace, it looks like people need to lean on somebody to help get into the market. It’s not unusual. Families are coming together and coming up with creative solutions to help children get into the marketplace.”
Baillie said the data doesn’t specify how much the downpayments are or if parents are helping with the five per cent rate, or even helping to get over a larger threshold so their children’s mortgage payments are smaller.
She added that notaries smooth out the process and can help figure out what people’s options are — whether parents and children will go on the title or what should happen with payment should a parent pass away.
“There’s lots of ways notaries can work with moms and dad or the kids to figure out what makes for everyone involved,” Baillie said.
“If you were to go on title there are many things to consider, ultimately up to the client to pick the path that works best for them.”
As part of the annual online survey, 133 of the 340 membership notaries completed the online survey.
People seek notaries for a wide-range of contentious legal matters, including residential and commercial real estate transfers and mortgage refinancing among other things.
Should I ask Mom & Dad for help with a Down payment? Should I help my child with a down payment?
Getting a family member, friend or close relative to give you or lend you money for a down payment sounds as good as gold.
However, there are considerations on both sides of the proverbial gold nugget.
If you are a parent, considering why your child doesn’t have the equity to put down a down payment isn’t as simple as writing it off as a sign of the times.
Consider asking them for a credit score or ask them to boil down why they aren’t able to do it.
Having a home to make payments on can actually hurt, more then help if the person isn’t ready, whether they believe they are ready or not.
If however, they have good credit, a stable job and the means to make the payments, but the landscape doesn’t allow them to afford a downpayment, it may be something to consider.
Consider making it a loan, instead of a gift, hereby ensuring your child still feels independent themselves, and protecting yourself in case you need the funds or the potential of a bad relationship whereby the partner takes half.
On the flip side, if you are a potential homeowner looking to get into your first home, take a hard look at your finances to ensure, you are ready.
Even with the downpayment addressed, all considerations including maintenance, a contingency fund in the case of a challenge, property taxes and all other potential homeowner costs, need to be carefully considered.
As important as getting into the market, is getting into the market when it is right for you.