An Ontario woman said it would have been impossible to buy a home without her mother, an anecdote buoyed by the fact that more than 17 per cent of Canadian homeowners born in the 1990s own their property with their parents, according to a new report.
He Statistics Canada Study released last Wednesday shows the extent to which parents’ wealth influences their adult children’s homeownership outcomes as affordability and housing price pressures have intensified in recent years.
In response to these findings, three Ontario adults born in the 1990s spoke to CTV News Toronto about their parents’ involvement in their home-buying process.
Kirsten Cuffie, 32, and her husband bought a house in Keswick, Ontario. with her mother seven months ago.
Having grown up in Toronto, Cuffie knew that buying a home in the city was out of the question, but what was more surprising were the obstacles he would have to overcome to own property in a town an hour north of the city. .
Cuffie said he was approved for a $350,000 mortgage. “Even the mortgage broker told me, ‘You won’t find anything for that,’” she recalled. She worked full time as a billing coordinator for an electricity company, but as the self-employed owner of a car dealership in Newmarket, her husband had no guaranteed income to contribute.
But then Cuffie’s mother sold her house in Toronto last summer and came up with a new idea: What if they bought a house together and co-signed the mortgage?
Cuffie found a two-story corner lot in Keswick with a large backyard for his dogs, three bedrooms for his family to grow in, and a basement they could finish for his mother.
The house was over her budget of nearly $800,000, a price Cuffie said would have been impossible without her mother’s help.
Kirsten Cuffie, 32, and her husband bought a house in Keswick, Ontario. with her mother seven months ago.
“We paid $50,000. My mom paid $150,000, which is a huge difference,” she said.
“In fact, many of my friends have told me that they are in a similar situation… it’s not ideal, but this is what people are doing these days, or else people will just be stuck.”
At age 26, Jamie Foster made a down payment on a condo in Bowmanville, Ontario, for $86,000. He had saved for years while living at his parents’ house, working full-time since he was 19, at McDonald’s and the Beer Store, before turning to accounting. “It was always that everything else had to go in the back of the house,” he said.
But to pass the stress test, her mortgage broker recommended co-signing with her mother, positioning her as a one percent owner, despite having no financial stake in the property. In doing so, the lender analyzed his two incomes and decided that they would pass the stress test if interest rates rose. “It was like a little cheat in the system,” Foster said.
Co-signing a mortgage involves adding a parent’s name to the property title and mortgage loan to obtain better terms through the parent’s financial situation or credit rating, without the intention of cohabiting, according to Statistics Canada .
Jamie Foster and her father sign the deal for their condo in Bowmanville, Ontario. Noah Endale, a 33-year-old software engineer, said co-signing with his father allowed him to buy a place in Toronto. “I couldn’t get everything I needed in the city,” he said.
His mortgage pre-approval jumped from the $350,000 range to more than $1 million after he signed with his father and purchased a one-bedroom condo in East York in 2022.
“It’s not a good thing that we’ve come to this,” Endale acknowledged. “It is definitely not sustainable. “You wonder how this started and how we can get out of this situation.”
Victor Tran, a Toronto mortgage broker, points out that even if parents are only co-signing to increase their children’s income in the eyes of lenders, they should be aware of the responsibility that comes with it. If a child misses a payment, for example, it could affect a parent’s credit score, Tran said. “That’s something all co-signers should keep in mind.”
Foster said she talked to her parents about the fact that her mortgage payments would fall on them if her financial situation changed drastically in an unforeseen situation. “But at the same time, they knew me well enough that I never let it get to that point,” he said.
“If the co-signing hadn’t happened, I wouldn’t be where I am today,” Foster said.
In a month, Foster, now 30, will move into an $800,000 three-bedroom home in Bowmanville with her partner and dog.
“I kept my mother on the title with me as the one percent owner, because we also learned that it is cheaper with the mortgage company to transfer a mortgage to a new location,” Foster said.
“It’s amazing”
Josh Gordon and Michael Mirdamadi, analysts with the Canadian Housing Statistics Program at Statistics Canada, set out to analyze the decline in homeownership among young people in Canada and the extent to which their parents’ financial situation influences their chances of buying. a house. .
“It is striking that approximately one in six properties owned by people born in the 1990s are co-owned by their parents,” Gordon said.
He noted the importance of this trend in more expensive urban markets, such as Toronto and Vancouver, where children of parents with greater real estate wealth tended to own properties that were approximately 30 to 40 percent more valuable than those whose parents had less. real estate wealth. .
“That indicates that parental real estate wealth may play an important role in young adults’ homeownership aspirations,” he said.
When it comes to the impact these trends have on housing affordability in Canada, Mirdamadi said these findings are indicative of the “catalyst or impetus” for the growing challenge of entering the housing market.
“Their outcomes, their situation, their homeownership status will be more influenced by how their parents are doing, so people may have concerns about intergenerational inequality as a result of that,” Gordon added.
Analysts are not tasked with outlining how their findings should inform policy decisions, but Gordon said: “It raises important questions about the extent to which people have equal opportunities in society. It refers to those types of questions.”