Assisting Your Kids to Buy A Home
Posted By: Rachel Kavanagh
Assisting Your Kids to Buy A Home – As the price of a house continues to rise in most major cities, the millennial generation continues to find it difficult to leap into real estate. The difficulty is not in making the monthly payments or maintaining the property, but rather coming up with the down payment.
So adult kids today turn to their parents for assistance.
Many parents today believe the only way their kids will be able to own a property is if they buy it for them or at least co-own the property. Recently, there has been a significant increase in the number of parents who are purchasing a property for their children.
The average down payment for a property is approximately 5% of the sale price. In Markham, where the average sale price for a detached home is $1,228,445, that equals to a down payment just over $60,000.
In Stouffville, the average sale price for a detached home is $1,052,067, that equals to a down payment just over $50,000. Although the amount is lower than Markham, most millennials don’t have access to such a large amount of funds.
For most parents, the goal is to purchase the property and then have the children cover the costs – everything from insurance and taxes to repairs. The parents need to ensure that their children have some skin in the game and a say in the process or else the child will not stay involved.
Parents should include the adult child in everything from the selection of the property to the application of the mortgage. The learning obtained from observing these interactions will aid the adult child later on in life. Failing to involve children in home-buying and the responsibilities of homeownership can lead to children underappreciating the value of what is being given.
There are risks when parents decide to assist their adult children with purchasing a home. If parents wish to retain control of the property, they should include their name on the title, especially if the plan is to sell the property down the road.
There are a variety of ways a parent can protect monies provided to a child for the purchase of a home, including taking back a mortgage that might later be forgiven and various trust arrangements. A contract, for example, can be prepared that indicates, if the home is sold, they will receive their down payment back, with 5% interest.
Parents also need to protect their investment if the child is married or gets divorced. By making it a business partnership rather than a handout, it removes a lot of the awkwardness between the parent and adult child.
If adult kids can be financially savvy and show responsibility, parents will help with their real estate goals as much as they can.
* Assisting Your Kids to Buy A Home – written by Benczik Team Realty
For more information on your home, visit our website and get a free home evaluation to ensure you get the best seller’s service! With experience around Markham, Stouffville, Unionville, and all of York Region, Benczik Team Realty works to serve you in the best way possible! Act now, and don’t miss out on this ever-growing market.
