Should You Help Your Kids Buy a Home?

5 Financial Filters to Think Through First

With home prices soaring across Canada, many adult children are turning to their parents for support in getting into the housing market. And increasingly, parents are stepping up.

More than a third of first-time homebuyers in Canada (35%) received a lump sum gift toward their purchase last year. In Ontario, about 4 in 10 parents of young homeowners helped financially, with average gifts exceeding $70,000. Nearly half of these parents pulled from personal savings, while 15% dipped into retirement funds or investments to make it happen.

This generational generosity is admirable, but it's not without risk.

At DO Wealth, we know how emotionally rewarding it can be to help a child buy a home. But we also know how quickly that generosity can backfire if it compromises your own retirement goals or creates family tension. Before jumping in, here are five financial filters to consider.

1. Can You Afford to Help Without Risking Your Retirement?

Supporting your child's dream of homeownership shouldn't come at the expense of your own long-term security.

Start by reviewing your retirement plan with your advisor. Will you still have enough to fund rising healthcare costs, inflation, and possible home modifications as you age? Are you accounting for longer lifespans and potential eldercare needs?

Rule of thumb: If helping your child would require you to delay retirement, reduce your retirement contributions, or tap into funds earmarked for your own future needs, reconsider the timing or amount.

Remember, helping today is generous, but ensure you aren't creating a situation where you'll rely on your children financially later. Your first obligation is to yourself.

2. What Form Will Your Help Take?

There are several ways to help a child buy a home—each with distinct advantages, risks, and tax considerations:

1. Gifting funds for a down payment is emotionally rewarding and legally straightforward, but once you gift the money, you lose all control over how it's used. If your child divorces, those funds may be subject to division as part of the matrimonial home. Consider whether to structure this as an advancement on inheritance to maintain equity among siblings.

   
   

2. Lending money may seem safer, but informal family loans can often lead to misunderstandings and strained relationships. If you go this route,we highly recommend formalizing the terms with a lawyer or another third party, establish clear repayment schedules, and consider whether you're prepared for the possibility that you may never be repaid.

   
   

3. Co-Sign a mortgage can help your child qualify for a better mortgage rate or larger amount, but it makes you legally responsible for payments if your child defaults. Your credit score and debt ratios will also be affected. If you're added to the title, new CRA bare trust rules may apply, triggering annual reporting requirements.

   
   

4. Buy and renting to your children at fair market rates, building a real estate portfolio while providing stable housing. This option requires careful planning around landlord-tenant laws, insurance considerations, and potential capital gains implications.

   
   

5. Joint ownership allows you to purchase a property together with your child, each owning a percentage based on your respective contributions. This maintains your investment while helping them enter the market, but requires clear agreements about maintenance, improvements, and eventual sale.

   
   

6. A discretionary trust allows you to retain control over a property until you're ready to transfer it outright. It can protect the asset in case of divorce or bankruptcy, but it comes with ongoing legal and tax complexity that requires professional administration.

3. How Will This Impact Your Other Children?

If you help one child now, will you be expected—or able—to help your other children in the future? Unequal financial gifts can create lasting resentment, especially when estate planning enters the picture.

Have open conversations with your family about your intentions. Consider strategies to maintain fairness:

• Equal gifts over time as each child reaches home-buying age

• Adjusted inheritance amounts to account for early gifts

• Different forms of support that reflect each child's unique needs and circumstances

Document your decisions and reasoning to avoid confusion later.

4. Have You Considered Legal and Tax Consequences?

Helping with a home purchase may expose you to more than just financial risk—it can come with significant tax and legal implications:

CRA Considerations:

• If you're on the mortgage or title, the CRA may classify it as a bare trust, triggering new annual reporting requirements (Form T3)

• Loans to family members may need to comply with prescribed rate rules to avoid attribution

• Being a co-signer may affect your ability to claim certain tax credits

  
  

Family Law Risks:

• A gifted down payment could be considered part of the matrimonial home in the event of divorce

• Joint ownership arrangements may complicate property division

  
  

Tax Implications:

• Buying a second property as an investment triggers capital gains taxes when sold

• Rental income from family arrangements must be reported at fair market rates

• Principal residence exemption may be affected with multiple property ownership

  
  

Always consult both a financial advisor and a lawyer experienced in family wealth matters before making final decisions.

5. Are You Aligned on Expectations and Boundaries?

Whatever route you choose, clarity and communication are essential. Consider these questions:

• Do you expect repayment, and on what timeline?

• Are there conditions attached to your gift or loan (maintaining the property, staying in the area, etc.)?

• Are you comfortable if the money is used differently than intended?

• How will this arrangement work if your child's relationship status changes?

• What happens if your child wants to sell or upgrade?

  
  

Protect both your financial investment and family relationships by putting all agreements in writing and setting expectations clearly from the beginning. Consider involving a family mediator if discussions become complex.

Government Programs That Can Amplify Your Help

Even modest contributions can go further when paired with available government incentives. If your child is a first-time buyer, ensure they explore these programs:

Program	Benefit	Key Details
First Home Savings Account (FHSA)	Tax-deductible contributions + tax-free withdrawals	Up to $8,000 annually, $40,000 lifetime limit
Home Buyers' Plan (HBP)	Withdraw up to $60,000 from RRSP	Must be repaid over 15 years, interest-free
GST/HST New Housing Rebate	Rebate on GST/HST for new homes	Up to $6,300 federally, varies by province
Saskatchewan First-Time Homebuyers' Tax Credit	Up to $1,575 tax credit	For eligible Saskatchewan residents
BC First-Time Home Buyers' Tax Exemption	Property transfer tax exemption	Homes up to $835,000 in BC

These programs can significantly reduce the financial burden on your child and minimize the amount you need to contribute.

A Strategic Approach: Questions to Ask Your Advisor

Before making any commitments, discuss these key questions with your financial advisor:

1. Cash Flow Impact: How will this gift or loan affect my monthly budget and emergency fund?

2. Retirement Timeline: Will this delay my retirement plans or reduce my retirement income?

3. Tax Optimization: Are there tax-efficient ways to structure this assistance?

4. Estate Planning: How should this be reflected in my will and estate plan?

5. Insurance Needs: Do I need additional liability coverage if I'm co-signing or jointly owning?

   
   

Final Thoughts: Generous, But Strategic

Helping your children buy a home can be one of the most meaningful gifts you provide. But it should be done with clear eyes, careful planning, and professional guidance.

The families who navigate this successfully are those who balance generosity with financial prudence, who communicate openly about expectations, and who structure their help in ways that protect both generations' long-term interests.

At DO Wealth, we help families structure these arrangements thoughtfully, ensuring you can support your children's goals while protecting your retirement security and preserving family harmony.

Ready to explore your options? Book a consultation with DO Wealth today. We'll help you find the right approach for your family's unique situation, ensuring your generosity creates lasting positive impact without compromising your own financial future.