More & more Millennials are getting help from from the Bank of Mom & Dad to purchase their first home but just where is the money coming from?
Well, a bigger & bigger portion of those gifted funds are coming from money received from a reverse mortgage done on the parents property.
Reverse mortgage used to be a dirty word but rates and fees to set up this kind of financing have got better & better over the years.
The most you can borrow is 40 to 50% & even in the most conservative calculations of home value increases one would still have plenty of equity remaining when they pass away.
More and more parents are wanting to see their adult children reap the benefits of an inheritance before they pass away.
"Young Canadians are increasingly receiving help from their parents in order to become first-time buyers in Vancouver and Toronto."
A study by lender HomEquity Bank shows that parents are keen to find out about reverse mortgages to release equity in order to give their kids a downpayment.
"Ten years ago, this topic rarely came up as most seniors were more concerned with remaining self-sufficient. And, first-time homebuyers were purchasing houses on their own. That's changed. Up to 30 per cent of my clients aged 60+ now want to discuss to what degree they can help their adult children financially," explains Rona Birenbaum, financial planner and founder, Caring for Clients.
HomEquity says that by using a zero-rate mortgage registered in the home, the parents’ funds are protected and they can later choose to cancel the mortgage with the funds considered as a gift."
If you have any questions about Reverse or CHIP mortgages please feel free to reach out to me as I am a designated mortgage broker for this type of financing at Home Equity Bank.
310-328 West Hastings Street