In todays Real Estate market, the chances are slim that our children will be able to purchase a home without the help of us, the parents. This then raises the question of how do we protect this investment against potential creditors which includes an ex-partner or ex-spouse. Over the past 20 years, I have had this very conversation with friends even when my children were young. You hear some horror story about the parents giving their child money towards their down payment and then a year later, the couple splits up. Well guess what, so does the money you gave them.
Here are a couple of ways to consider protecting your investment but speak to your lawyer for all the pros and cons of how to proceed.
Instead of simply giving the money to your son/daughter, you could buy the home in your own name or buy it together with your child which will ensure that you have some control over the property. Or you could structure the gift of a down payment as a “loan” and possibly take back a mortgage against the property as security, thereby protecting your money from any third-party creditors. A clause in your Will could ensure that this loan is forgiven upon your death.
There may be other options at a parent’s disposal to help make sure that any assistance they give to their children is done wisely and prudently.
Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.
To contact Colleen, please fill out the form on www.mortgagesbycolleen.ca or call 416-459-2406