In today’s highly competitive real estate market, it’s important to leverage any advantage you have. For many aspiring first-time homebuyers, that includes asking Mom and Dad for help. In fact, according to the 2017 Genworth Canada First-Time Homeownership Study, 34 per cent of first-time homebuyers surveyed received a cash gift or loan from family members to put toward their down payment.

When discussing personal finance with your parents, be specific about your needs. Three fantastic ways your parents (and other loved ones) can help out is through cash gifts, loans and mortgage co-signing.

CASH GIFTS

If you have an occasion where gifts are likely to come your way – an upcoming wedding, for example – it’s not inappropriate to inform friends and family of your homeownership goals.

The best way to do this is to get your inner circle – parents, siblings, best friends – to let others know you’d prefer contributions toward your first home, rather than, say, random toaster ovens. Crowdfunding platforms make it easy to manage contributions from well-wishers.

Outside of big life events like a wedding, gift bonanzas are typically few and far between. But if anyone is likely to spoil you on your birthday or over the holidays, it’s Mom and Dad. Focus their generosity by reminding them that sweaters shrink… but your first home will grow in value!

PERSONAL LOANS

One of the most effective ways parents can help is by contributing toward a down payment. While you can buy a home with as little as five per cent down, that’s a big chunk of change, since the average Canadian home costs $530,300.

Between saving for retirement and other financial obligations, few parents can easily cut their kid a five-figure cheque with no strings attached. But even if a significant cash gift isn’t possible, a no-interest or low-interest loan could be.

By pooling your savings, money withdrawn from your RRSP under the Home Buyers’ Plan, and a loan from the Bank of Mom & Dad, you may have the down payment you need, sooner than you think.

Remember to always put interest and repayment terms in writing, so expectations and responsibilities are clear to both parties. Also, the cash gift needs to be in your account for at least three months to be considered part of your down payment!

CO-SIGNING A MORTGAGE

The most significant way parents can help aspiring first-time homebuyers is to co-sign their mortgage. A financially established loan guarantor can make a world of difference for first-timers who may have less-than-stellar credit scores or a down payment of less than 20 per cent of the cost of a home.

By co-signing your loan, your parents are agreeing to make any mortgage payments you miss. They are also putting their own credit on the line, so it’s important to discuss expectations, obligations and responsibilities upfront, again putting the agreement in writing.

OTHER AID

Even if none of the above are options, there are other ways Mom and Dad can help. Letting you live in their home rent-free, watching your kids and even having you over for Sunday dinner are generous gestures that can help you save money, supporting you along the road to homeownership.

This article is part of our Guide for Millennial Homebuyers.

Achieve the homeownership dream sooner