As the price of real estate continues to rise, parents are left with no other option than to help their kids enter the housing market. First-time buyers find it extremely difficult to save up for home down payments as home prices increase beyond their reach.
Real estate agents are becoming more familiar with parents helping their kids pay for their new homes. According to Elan Weintraub, a director and mortgage agent with the brokerage Mortgage Outlet, the average price for detached homes in the Greater Toronto Area rose to $1,068,670 while condos were sold for $442,598 in January. These figures indicate an increase of 26.3% and 14.5% respectively.
Parents are presently going all out to help their kids actualize their homeownership dreams.
First-time buyers who cannot come up with the 20% are expected to pay mortgage insurance fees if they intend to borrow from larger institutions such as banks.
However, the Canada Mortgage and Housing Corporation which funds almost all of insured mortgages in Canada, does not insure mortgages on homes with values more than $1 million which apparently is the average prices for a detached home in Toronto. This emphasizes the significance of a 20% down payment to enter the Toronto real estate market.
The trend of parents helping out their parents is on the rise but not all first-time buyers are lucky enough to have parents that can given out such a huge amount of money.
Some parents who cannot afford to make the whole down payment for their kids find other alternatives such as co-sign to make the down payment by becoming shared owners of the property. But in reality their kids become the actual owner of the property.