Money The best way to help your child buy a home

22:38  13 november  2017
22:38  13 november  2017 Source:   MoneySense

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The complications and benefits of gifting funds to your son/daughter to buy a condo.

But it’s important to help in a way that works for—not against— your child and yourself. The best time to commit to helping your child and to provide the money is before your child makes a You can also withdraw up to ,000 in earnings to help kids or grandkids buy their first home without

Q: I am in the process of helping my daughter buy a condo, here is what we have done so far:

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Thankfully, there's ways parents can help their kids buy a home . This option should only be done if you have the utmost confidence that your child is going to make the monthly mortgage payments as well as taxes and homeowners insurance.

For parents who have the funds and desire to help adult children buy a home , gifting a down payment is one of the most common ways to help . "Then they send the money to the settlement agent, and as long as it matches up with the gift letter, we're good to go."

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We signed the mortgage with her as primary and me as co-signer,  I will be giving her the down payment and she is going to be living there and she will be the one paying the mortgage and all expenses.

My question is what would be the best way to do this transaction looking it at both a legal and tax perspective. From the tax perspective: How should I arrange/declare that I am gifting her the down payment on this condo? And when do we claim the tax breaks for her as a first time buyer? Would that be at time of paying the lawyer for land transfer etc.? Also, I would like to still be able to have some room on my credit as to buy another property so we were thinking if her owning 90% of the condo and me keeping just 10% would work for this purpose. According to the lawyer, we both have to have some percentage assigned because we are both on the mortgage.

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Having the means to help grown children buy a house or apartment is a blessing and a luxury. But before you sign on the dotted line, consider whether and how best to do so. There is no right way usher your child into homeownership, but plenty of wrong ways .

Want to buy a second property that your children can live in rent-free, while also avoiding capital gains tax? It sounds too good to be true. As rising property prices put home ownership out of reach for many in their 20s and 30s, this can also be a fantastic way to help your child escape the costly

From a legal perspective, we are thinking about joint tenancy as the best way to protect the asset if one of us passes away unexpectedly.

My intention is really just to help her “fly on her own,” but with all the legal and tax implications, we’d really like to do it in the best way possible.

—Claudia

A: Hi Claudia. First, let me congratulate you and your daughter! It’s wonderful that you are in a financial position to help her with the purchase of her first property.

It appears you’ve given the current and future implications of this decision a great deal of thought.

I can only assume that your lawyer has asked for a percentage split on the property because you are co-signing the mortgage and because you are opting to have both you and your daughter on title as owners’ of the property.

This legal structure helps limit the amount of taxes you owe, as you can specify that your share in the property is nominal, say 10%. Just keep in mind that each joint tenant can gift or sell their portion of the property. That means, your daughter has the legal right to sell her 90% stake in the condo even if you don’t want or agree to the sale. It also means that you are exposing yourself to creditors, should your daughter file for bankruptcy or become a defendant in a lawsuit. Finally, the 10% that you own will not be sheltered under the principal residence exemption as this property is not your primary residence.

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By being a good parent yourself, you show your children how to be good parents. 5 Tips for Dealing with an Adult Child Moving Home . 5 Ways to Stay in Touch With Your Grown Children . 10 Tips for Helping Your Child Buy a First Home .

But others will need to borrow money against their home to help their kids out. There are several ways to do this. Read Equity release pros and cons. If you decide to borrow money to help your children , it’s a good idea to get some professional financial advice first.

But there is a silver lining. The Canada Revenue Agency does not tax gifted money. That means if you opt to gift your daughter the entire down payment to purchase the condo neither you nor your daughter are required to pay tax on that gifted money. If, however, lenders find out that this gift is, in fact, a loan, this can seriously impact whether or not your daughter can qualify for a mortgage as all debts (even loans to family members) are included in debt ratios used to qualify borrowers for mortgages.

Finally, your lawyer or legal representative handling this real estate transaction will take care of the paperwork when it comes to the first-time home buyers’ tax credits and rebate. That said, ask your lawyer to confirm that your daughter won’t be exempt from these credits because you are on title. According to the CRA, a buyer is disqualified from claiming these credits if they’ve already owned a home or they lived in a home owned by their spouse or common-law partner now or in the last five years. While it seems remote that your daughter would lose eligibility to these credits, it’s still better to check now than find out the hard way.

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So is it a good idea for parents to step in and buy their kid a home ? Parents have helped their children for decades with down payments and even loans. But recent economic and mortgage-market realities have made the question more acute.

Here are a few ways that you can help your child at home . Name each letter out loud as you write it to help your child learn the letters of his/her name. | When buying your child toys to play with, remember that you are really purchasing teaching tools.

Romana King is an award-winning personal finance writer, a real estate expert and speaker.

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