The Bank Of Mom And Dad


As long as real estate has been traded, parents have given their kids a helping hand when it comes to buying their first home. Two decades ago when I began my career in the real estate biz this often meant a few bucks towards closing costs, perhaps some dollars towards new furnishings or, if the folks were really flush with cash and perhaps celebrating your first marriage, they might match your down payment.

But today, in a market where demand has exceeded supply for well over a decade, and with prices spiking just beyond the threshold of affordability for many buyers, the Bank of Mom and Dad has become increasingly common, if not tapped out. Parents are increasingly ‘gifting’ sums of money in the amount of five or six figures.

The Toronto Star just published an article which confirms what most Realtors and Mortgage Brokers already know. It features one of our clients, Jake Abramowicz (now the Mortgage Jake Team), who also happens to be an amazing mortgage broker! He shares the behind-the-scenes reality of what’s really going on in the world of real estate financing…

Here in the Greater Toronto Area, parents are stepping up with enough cash that their kids can put down at least 20 per cent of the purchase price to avoid having to pay the Canadian Mortgage and Housing Corporation mortgage insurance premium required for high-ratio financing.

CIBC economist Benjamin Tal believes that backstopping by Mom and Dad, coupled with low interest rates, has kept the first-time buying market far more buoyant than many experts had expected in the wake of the tougher mortgage lending rules imposed by Ottawa over the last four years. “The (housing) market would have been much weaker if we didn’t have this phenomenon. There’s no question about that,” says Tal, deputy chief economist of CIBC World Markets.

For many, it’s “Thank goodness for the Bank of Mom and Dad”.

~ Steven and the urbaneer team


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