Buying a home in Sarnia- Lambton can be a stressful process- however, could you imagine being a first time home buyer in today’s market? With housing prices continuously rising across the country, it is becoming more and more difficult for young adults to afford to purchase a home. The downpayment alone forces many of the younger demographic to turn to renting, which inhibits their ability to save in preparation for the future. With the rising prices of tuition and growing student debts, our children will be finding it more and more difficult to afford a home after school.
Recent studies have shown a trend in parental assistance in home buying for their young adult children. Lending a hand from the Bank of Mom and Dad to help them get an early start to the home buying experience. How can you help? There are many different ways you can aid as a parent to help your children survive the housing market in today’s world. Below are the most popular ways to help your children buy a home, followed by cautionary tips to ensure you are aware of before you make your move!
1. Assisting with Finances
If you are in a good financial position, this may be a good spot for you to help! You can provide the mortgage for your children. This saves them the hefty bank fees and interest that they would see by using traditional lenders. In doing this, you can charge much less interest, you can choose their monthly fees they would pay to you and you can decide whether to remove the down payment requirement upfront and the closing costs.
2. Give a Gift
This seems to be the most common option among parents to help their children purchase a home- helping their children with a down payment. This typically involves providing them with a cash gift to cover a portion of the cost they would need to put down upfront to purchase the home.
3. Co-Signing the Mortgage
Your child may be able to afford to buy a house, in that case- this may be the option for you! Having the money is great but there can still be obstacles in their path. For instance, they may have a patchy credit history. This means they may not meet the credit criteria. If this is your scenario- you can co-sign the mortgage with them to help improve their credit rating and allow them to qualify for more desired terms. Always be cautious, for, in this case, one poor move on your child’s part; be a default on taxes, fees or a payment- as the co-signer, your credit score may be negatively affected and you could have costs to cover.
4. Landlord
If you haven’t found the right option for you yet- maybe this is the one! You can be your child’s landlord. In this, you may decide to purchase a home for your child and charge them as a renter to live there. You are in charge of the cost of rent and can manage a far more affordable situation than if they were to rent from a stranger. When you receive their rent you can keep the money and return it to them so they can later purchase the home on their own- a rent to own scenario. Be cautious of possible taxes that can follow the purchase of a second home.
5. Expenses
As parents, we don’t always have money stashed away to help our children buy homes. AND THAT IS OKAY. This doesn’t mean you can’t still help! Many parents are unable to give large gifts or purchase a second home outright, instead, they can help with expenses! If your child is renting, you can help them by covering the cost of their rent, whether fully or partial, this will help them save up money for a downpayment. Alternatively, you could let them live at home, rent-free so they can allocate all their earnings to purchasing a home.
All in all, there are many ways you can help your child purchase a home in Sarnia-Lambton in today's market- be creative - but always make sure you can afford it. Don’t be dipping into your retirement savings, always keep the best interest of yourself and your child first in mind.
