Parents are always worried about something with their children, and where they are going to live and how they are going to afford it is no exception.
The bank of mom and dad is a common source of down payment for their children, and the strategy continues to grow with the significant rise in prices and wage gap growing in today’s marketplace.
For example, some people in the upper middle class are buying properties for their kids and grandkids and the benefits are multifaceted: they generate income now, while someone else pays the mortgage (a tenant) and the value increases.
The families can then refinance at a later date and gift some equity that was pulled out what was essentially paid for by a tenant and continue generate income to assist with retirement, since a lot of these homeowners don’t have the company pensions that were available a generation ago. However, even this group feels they are in crisis by not having enough cash flow to save for retirement. But with the above strategy, essentially your downsized home was purchased early with the basic principal of time working in your favour to get further ahead financially so everybody wins without sacrifice in this scenario.
Our demographics are changing rapidly and this is something that is motivated by families who want to keep their children close to them and hope to have them enjoy the same lifestyle they have created. The majority of Canadians implementing these strategies are households earning $200,000 a year and have a net worth of over $2 million, including real estate.
The amount parents have gifted their children has changed dramatically with the inflation changes over the years. In the 1980s, a gift for a down payment averaged $10,000, but today that amount is between $200,000 and $500,000!
According to mortgage insurer Genworth Financial, 40 per cent of first time homebuyers in Vancouver had help from their parents, compared to 22 per cent in the rest of Canada.
These strategies are often not commonly considered and depending on the mortgage-provider choices you make early on, having a provider like a Dominion Lending Centres mortgage professional who focuses on these wealth building strategies will help you avoid missing opportunities.
Anybody can get you a mortgage, however, a proactive provider can assist you and show you what the wealthiest Canadians are doing so you don’t not miss opportunities.

Courtesy of Angela Calla, AMP – DLC Angela Calla Mortgage Team