In the past several years, more parents have been stepping in to help their adult children purchase a first home. Even though home prices have come down compared to their peak, they remain relatively high overall, and for a growing number of first-time buyers, family support has become the difference between renting another year and finally getting into the market.
Broker Clinton Howell of RE/MAX Escarpment Realty Inc. has watched this shift play out across Burlington and the surrounding communities. Parents are gifting portions of down payments, co-signing mortgages, and in some cases going on title and purchasing homes together with their children. It is a meaningful and rewarding way to help the next generation into homeownership, but it also comes with financial, legal, and family considerations that are easy to overlook in the excitement of the moment.
Co-Signing the Mortgage
Many parents prefer co-signing over handing over a large cash gift. It allows a buyer to qualify for financing they might not otherwise meet on their own, while letting parents keep their own savings and investments intact for retirement or future needs. Structured properly, and with the right professional guidance, co-signing can open the door to homeownership sooner than it would otherwise arrive.
That said, co-signing is a significant legal and financial responsibility. If the child cannot make the payments, the co-signor becomes responsible, and the arrangement can affect the parents’ own future borrowing capacity. Parents considering this route should already be financially established, with no plans that would require additional financing of their own, such as a major renovation or a move to a larger home.
Trickier questions tend to surface around divorce and inheritance. If a marriage ends or a parent passes away, what happens to a down payment that was gifted years earlier? A real estate lawyer can help determine whether a trust agreement makes sense, clarifying ownership interests and how funds should be repaid before any of these situations arise.
Gifting a Down Payment
A gifted down payment reduces how much a buyer needs to borrow and can lower monthly payments as a result. In some cases, it also helps buyers avoid CMHC mortgage default insurance by pushing their down payment up to the 20% threshold, which removes the added insurance cost that comes with high-leverage mortgages.
Family dynamics matter here too. If gifted funds go toward a home purchased with a spouse or partner, parents may want that contribution protected in case the relationship ends. A marriage contract or cohabitation agreement can help ensure gifted funds intended for one child remain protected rather than becoming part of a future division of assets. It is a conversation worth having with a lawyer before the transaction closes, not after a dispute arises. Parents with multiple children should also think about how a significant gift might affect fairness across the family down the road, which is often best addressed as part of broader estate planning.
The Bigger Financial Picture
Before committing to either option, families are wise to look at the full picture: short-, medium-, and long-term finances, and whether helping out financially could affect retirement plans or long-term security. Buyers, meanwhile, need to be sure they can comfortably manage more than just the mortgage payment. Property taxes, insurance, utilities, and maintenance all add up, and if a buyer isn’t qualifying on their own, it’s worth asking why before assuming a gift or co-sign is the right fix.
The right professionals can vary by situation, but often include a REALTOR, a mortgage specialist, a real estate lawyer, a financial advisor, or a tax professional. Getting the right voices involved early tends to prevent complications later. For families weighing their first purchase together, our home buyers resource and frequently asked questions page are good starting points for understanding what the process actually involves.
The Takeaway
Plan first, and have open conversations before any money changes hands. Is the money a gift, or is repayment expected? If someone is co-signing, when and how will they eventually come off the mortgage? These are the kinds of questions that are far easier to answer up front than after the fact. Depending on the situation, marriage contracts, cohabitation agreements, trust agreements, or updates to an estate plan can all provide valuable protection for both parents and children.
Helping a child purchase a home is one of the most generous things a parent can do, but it deserves the same planning as any other major financial decision. It isn’t just a real estate transaction. It’s a financial, legal, and family decision all at once, and getting the right advice early makes all the difference. Realtors like our team can point you toward the professionals who can help, and can walk first-time buyers and their families through everything they need to know about buying their first home with confidence.
June Market Update
Broker Clinton Howell has helped hundreds of buyers purchase their dream home in Burlington, Waterdown, Ancaster, and beyond, guiding them each step of the way. The Clinton Howell team was recently honoured with the BurlingtonToday.com Readers’ Favourite Award for Top Real Estate Team, a reflection of their ongoing commitment to serving the community with excellence. For a closer look at how the local market is shaping up for buyers this season, see our latest Burlington market update.
Buying a home is rarely just about the numbers. When family is involved, a little planning up front goes a long way toward protecting everyone at the table.
