Helping Children with A Down Payment
24th October 2017
Although home prices in Toronto and Vancouver seem to have stabilized recently, they are still at historical levels.
The average home price in these two major Canadian cities are still well over $1 Million. Unsurprisingly, first-time homebuyers are finding it increasingly difficult to get onto the “property ladder”. It is now harder than ever for first-time homebuyers to own a home; so what are they to do? Studies have shown that more and more millennials are turning to the bank of mom and dad for help with their down payments.
According to the latest statistics from Mortgage Professionals Canada, down payment gifts from parents have increased significantly in the last 16 years, going from 7% in 2000 to 15% for homes purchased between 2014-2016. The average gift amount has skyrocketed as well. Industry experts have seen many down payments in the six-figure range – $100,000 to $200,000. The trend is expected to continue, as 2017 is predicted to be “the most difficult year for a first-time homebuyer in the last [decade]”, according to James Laird, co-founder of RateHub, a mortgage rate comparison website.
How can you help your children climb the property ladder?
With soaring property prices, you may be asking about your options to help your children break into the housing market. One way is by getting a reverse mortgage on your home. The CHIP Reverse Mortgage from HomEquity Bank has seen a growing number of senior Canadians over the years access their home equity in order to give a financial gift to their family members to help them with big purchases such as a down payment for a house. “We definitely see a growing trend of this at HomEquity Bank. We get a large number of clients who would take out $100,000-$200,000 in a reverse mortgage, they have the benefit of not having to make payments, and they give that lump sum of money to their kids to help them get started in the real estate market.” says Steve Ranson, President and CEO, HomEquity Bank.
How does it work?
A reverse mortgage is a loan secured against the value of your home. It allows you to unlock up to 55% of the value of your home without having to sell or move. The money you receive is tax-free and you are not required to make any regular mortgage payments until you move, sell or pass away.
Why should you give an early inheritance as a down payment now?
Life Expectancy – According to Statistics Canada, for a 65-year old couple there is a one-in-two chance that one of them will reach the age of 92. Do your children really need an inheritance when they are in their mid-to-late 60’s?
Create memories now – After you are gone, you will have missed out on seeing your children build a family in their new home. Giving a down payment now will enable you to create lasting memories while your health allows you to.
Find out more about this incredible opportunity to use a reverse mortgage to give the gift of a down payment to your loved ones today. If you’re 55 years or older and want to learn more about your financial options, including a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today.