Helping Your Kids Buy a Home

Helping Your Kids Buy a Home

Financial pressures are changing life choices. In fact, financial stability (44%) is the top consideration influencing Canadians' decision on whether to have children. That same financial pressure makes it harder for young adults to enter the housing market, leaving many parents to consider stepping in to help out. Here are three common ways parents can assist, with the main pros and cons for each option.

Parents co-signing the mortgage

Co-signing (or co-borrowing) means a parent adds their name to the mortgage application so the lender counts the parent’s income and credit when approving the loan.

Pros

• Can significantly improve loan approval odds and interest terms if the parent has strong credit.

• Avoids immediate out-of-pocket transfer of capital; it leverages existing income/credit.

• Keeps funds “virtual” — parents retain access to their own capital and property.

Cons

• Parent becomes legally responsible for mortgage payments if the child defaults, risking the parent’s credit and assets.

• May limit parents’ borrowing capacity for their own needs (retirement, new loans).

• Relies on parents’ still having income and a strong credit profile.

• Potential family tension if payments are missed or relationship dynamics change.

Parents take out a second mortgage or HELOC to lend money

A second mortgage or a home equity line of credit (HELOC) lets parents borrow against the equity in their home and then lend those funds to their children as a down payment or offer the funds as an outright gift.

Pros

• Converts home equity into liquid funds without selling property.

• Allows structured support (loan with terms) or a one-time gift; flexible repayment arrangements possible.

• Interest on HELOCs can be variable; often lower than unsecured loans.

Cons

• Parents increase their own debt and monthly obligations, which could affect retirement plans or financial security.

• HELOC rates are typically variable, exposing parents to rate increases.

• Borrowing against home raises the risk to the parents’ residence if they can’t meet payments.

Parents take out a reverse mortgage to lend money to their kids

A reverse mortgage lets homeowners (usually 55+) convert part of their home equity into tax-free cash without monthly mortgage payments; repayment occurs when the home is sold or the borrower no longer lives there.

Pros

• Provides access to large sums without monthly payments, preserving cash flow for parents.

• Can be a way to support children financially while parents remain in their home.

• Repayment is typically deferred until the home is sold, which can ease short-term pressure.

Cons

• Reverse mortgages reduce the parent’s remaining home equity.

• Interest compounds over time, increasing the loan balance and reducing net value of the home.

• Fees and higher interest rates compared with traditional mortgages;

• Adds complexity if parents are looking to move soon.

Final Thoughts

Choosing the right approach depends on family relationships, long-term financial goals, and risk tolerance. Documenting any loan or agreement in writing, consulting with a mortgage professional and tax advisor, and discussing implications with all family members can reduce misunderstandings and protect everyone’s interests.

Free Professional Consultation

If you have any unanswered questions, uncertainties or would like to go over your specific financial needs and goals, please contact me at mike.a@reversemortgageportal.ca to set up a call. As a CPA, Chartered Professional Accountant, of over 20 years, I know the importance of understanding the full picture before making recommendations. I look forward to learning more about you and your financial needs so I can help you make the best decision.

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