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PARENTS HELPING CHILDREN BUY A HOUSE: THE SECRET TO KNOWING WHAT TO DO – ASSUMING YOU REALLY HAVE THE MONEY

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Parents helping children buy a house: Introduction

Your kids are ready to buy their first house, but the financial realities of buying in cities like Toronto and Vancouver have all but dashed their hopes. Like the kind and caring parents you are, your first reaction is to jump in and save the day. You want to be one of those parents helping children buy a house.

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This is not the same as sponsoring a child in need. You have provided for your kids throughout and you want to help your kids become home owners; but, is that really a good idea? I know that buying a house for a child to live in is an emotionally charged issue, but there is a practicality to financial matters that should not be ignored.

Parents helping children buy a house: New mortgage rules stress test

The Office of the Superintendent of Financial Institutions’ (OSFI) new mortgage rules include a tougher need for buyers to be stress tested to see whether they can handle higher interest rates. Some may not qualify for the mortgage amount they want and may not be able to buy a house without parental help. In addition, parents are often asked to help with a down-payment. According to a 2017 national survey conducted by Leger on behalf of the Financial Planning Standards Council, 37% of Canadian parents intend to help their children with the purchase of their first home. Whether or not they can or should help financially is another issue.

Parents helping children buy a house: The secret to knowing what to do

Some parents gift the money and others look at it as a loan. Either way, there are some important issues you should consider before helping your kids buy their first home. It really isn’t a secret – just 4 simple questions to answer:

  1. Can you really afford to help your kids buy their first home? Some parents put themselves in financial jeopardy or risk their retirement savings. This is never a good idea. Will helping your kids buy a home impact your style of living? It shouldn’t. It doesn’t mean you love your kids less if you can’t help financially with the purchase of a home.
  2. Establish limits. If you can afford to help, sit down with your financial advisor/planner and establish the amount of money that you can comfortably help out with and stick to that amount. Don’t allow yourselves to be pressured into giving more than you can afford.
  3. Can your kids realistically afford to own a home? Home ownership is so much more than making a mortgage payment. There are property taxes, insurance, maintenance, utilities, unexpected repairs, etc. And what would happen if there was a health crisis or job loss? Can they afford to be home owners?
  4. Are your kids responsible with money? Or are they living above their means with maxed out credit cards? Have you had to bail them out of a financial jam before?

Parents helping children buy a house: Don’t put yourself in financial jeopardy!

Whatever you do, don’t put yourself in financial jeopardy! If you’re now experiencing financial problems as a result of helping your kids buy their first house, or for any reason, contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. has helped people just like you throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Give us a call today and book your free, no obligation consultation. We can help give you back peace of mind and set you on a path to debt free living.

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By Brandon Smith

Brandon Smith is a licensed insolvency trustee and Senior Vice-President of Ira Smith Trustee & Receiver Inc. The firm deals with both individuals and companies facing financial challenges in restructuring, consumer proposals, proposals, receivership and bankruptcy.

They are known for not only their skills in dealing with practical solutions for individuals and companies facing financial challenges, but also for producing results for their clients with realistic choices for practical decision-making. The stress is removed and their clients feel back in control. They do get through their financial challenges and are able to start over, gaining back their former quality of life.

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