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Moving into a new place (Delpixart/iStockphoto)
Moving into a new place (Delpixart/iStockphoto)

Carrick on money

This is the danger of helping your Gen Y kids buy a house Add to ...

When you look at house prices in markets like Toronto, Vancouver and surrounding areas, you have to wonder about the extent to which parents are helping their adult kids save a down payment. Now, we have an indication. A recent survey by the international bank HSBC found that 37 per cent of millennial home buyers got some financial help from parents.

Here’s why that’s a bad idea in some cases. According to the HSBC survey, 21 per cent of millennials who recently bought a house borrowed from family after buying to cover unexpected costs. See what you’re doing, parents? You’re helping your kids into a financial obligation they may not be ready to take on.

I also wonder about the finances of parents giving down payment money to kids. If parents have their retirement savings well in hand, it’s fine. But parents should not endanger their own financial well-being to help their kids buy a house, particularly if this help involves taking on debt.

Finally, let’s give some millennials credit for a novel way of saving a down payment. Just over one in five reported moving back in with parents to save for a deposit. I like this idea – if you’re driven to save for a home, why not explore all options to save as much as you can for a down payment? Even if you pay your parents rent, it should still be less than the exorbitant costs renters are paying in Toronto.

The survey was conducted last fall and involved 1,000 Canadians aged 18 and older. Millennials are people born between 1981 and 1998.

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Ask Rob
The question: My husband and I are in our early 30s. We have no debt except for a car payment that is ending next year and some student loans under $10,000. I recently acquired a stable healthcare job making around $75,000 while my husband makes around $45,000. We have approximately $130,000 left on our condo mortgage, leaving around $320,000 in equity to purchase a new home due to our growing family – space is an issue. Is it smarter to rent this condo out and use some of our equity to buy a smaller home? Or, sell the condo and use the money to buy a comfortable home that we can live in for the next 15 to 20 years?

My reply: “What about a keep it simple approach? Sell the condo, buy the long-term, comfortable house and settle down to raise your family. You could keep the condo and generate rental income, but then you’ve got a lot of exposure to a real estate market that some people think could pull back at some point. Also, keeping the condo means you can add property manager to your other duties in life. Finally, knock that student loan down as quickly as you can. Doing so will add to your household cashflow and help you afford that larger house.”

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

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