With rising housing costs and inflation, buying a home has become a distant, unattainable dream for many young people in Toronto. But with all the barriers to entering the market, demand is soaring once again, and homes are selling. So how are people buying them? There’s one source of capital that won’t stop flowing — the bank of mom and dad.
A 2022 study by the Ontario Real Estate Association found that four in 10 Ontarians have helped their children financially when purchasing a home, with 72 per cent gifting money to help with a downpayment, 61 per cent loaning money to help with a downpayment and 38 per cent helping with money for mortgage payments. On average, parents who gifted money for a downpayment gave $73,605.50, while parents who loaned money gave $40,878.90.
According to Statistics Canada, 68.4 per cent of Ontarians owned homes in 2021, and home prices have risen 450 per cent from 1996 to 2021 — meaning there are a whole bunch of Ontario parents sitting on considerable home equity. So it’s no surprise that some of them are deciding to pass down that intergenerational wealth.
“I don’t have to see my grandchildren being uprooted”: gifting the inheritance early
“My house is paid for so I knew I had that equity, so I used that and some money I had in the bank just sitting there and I helped [my son and his wife] with the downpayment to buy a townhouse,” Giovanna Cavarra, a real estate agent in Toronto, says. “What is the point in waiting until I’m dead to give them their inheritance?”
She also helped out her daughter, who was finding it difficult to qualify for a mortgage with her job as a freelancer. “So we bought a house in Bancroft because it was more cost effective out there and she loves the country. So she’s all set and the house is paid for,” Cavarra says.
Cavarra says that her kids, like many working adults, struggled with putting enough money aside to save for a house, “especially when rents are so high.”
Cavarra put a few measures in place while helping her kids to protect her retirement money — she added her name as one of the mortgagors so her name would be on the title, and when she loaned the money to her kids, she specified that it would be for a downpayment only. “I didn’t want them to use it to go on holiday for a year.”
The agent, who is 62, says she has friends her age whose houses are paid off but are still hesitant to help out of fear for dipping into their savings or ruining their retirement. “But I would encourage more people to do this. I mean, look at your kids, they’re settled, you know, they can have children, and you can smile inside and out. I get a lot of satisfaction because I don’t I don’t have to see them struggling. And I don’t have to see my grandchildren being uprooted every time a landlord wants to sell the property.”
Buying into stability: parents are setting their kids up for their futures
For Alison, a Toronto resident who helped her kids enter the real estate market, she sees helping young people buy a home as the equivalent of “passing on the farm.”
“In 1950, my father-in-law won the house being raffled off at the Exhibition, and he didn’t even buy the ticket — someone else bought it for him,” Alison, who asked that her name be changed out of a request for privacy, says. “My father and mother got their first house because my father’s family was in the excavation business, so they dug the foundation for their home as a wedding gift. And in 1982, when interest rates were skyrocketing, my in-laws gave my husband and I a $40,000 downpayment on our first house.”
She explains this to say that there is a long history of parents “passing on the farm” in her family — and it’s what inspired her to the do the same for her son and daughter.
Alison, who eventually sold the house purchased with the help of her in-laws and used the sale to purchase a place in Montreal, had taken a line of credit to buy a condo in downtown Toronto when they moved back to the city. After discussing her son’s future with him, Alison decided to buy a house in Oshawa with her son, putting that mortgage on her line of credit.
“Then the pandemic hit, and our daughter, who was living in a very small, what they call “junior” one bedroom apartment, was going to go crazy working from home there. So instead, we found another place and helped her on her line of credit with a downpayment,” she says.
Her daughter moved into that place in 2021, and in 2022, Alison sold their downtown condo, paying off the line of credit and debt from the home in Oshawa she co-owns with her son, and buying a larger condo in the suburbs of Toronto soon after.
Alison incurred plenty of financial strain in helping her kids, but it’s not something she ever thought twice about. “I believe it’s our — obligation is not the right word. It is the thing you do for love,” she says.
She says both of her kids weren’t sure if they wanted to buy a house at first, even if they could afford it. “I had to help them understand that when you buy a house, you’re buying into stability — knowing that you’re not going to get evicted,” she says.
The gift of a downpayment could mean the gift of a retirement fund
That’s something that Julia, Cavarra’s daughter-in-law, certainly understands after receiving help buying their home. “If Giovanna hadn’t helped us, we probably would be renting for a long time, or still living with them,” Julia says.
She also says that Cavarra’s help has meant that she and her husband have been able to create a meaningful retirement fund, since they’re now using the first townhome as rental income and have bought their new “forever home.”
“The townhouse is now our income property, and hopefully we’ll be able to hold onto it for a long time, and that’s going to be our retirement, hopefully,” she says.
It also means that they’ll be able to pay it forwards — to their son. “We would definitely help our son out. And that’s why the first house that we’re renting out, if we can save some of that and put it away for him, he’ll be able to buy a house when he’s older.”
For Cavarra, helping her kids out has brought her peace of mind.”It brings tears to my eyes to see that they’re settled, that my grandson has a beautiful home to live in. And, you know, that I was able to help them — it makes me feel very happy.”