Helping Your Kids or Grandkids Get Into the Real Estate Market: How Home Equity Can Help

For many Canadian parents and grandparents, one of the biggest challenges facing the next generation is getting into the real estate market.

Home prices, mortgage qualification requirements, and the size of the down payment can make homeownership feel out of reach — particularly for first-time buyers trying to save while also paying rent and managing everyday expenses.

If you have owned your home for several years, however, you may have an asset that could potentially help: the equity in your home.

As a mortgage broker, one of the strategies I regularly discuss with homeowners is whether accessing some of that equity could allow them to provide financial assistance to their children or grandchildren while still maintaining their own financial security.

What Is Home Equity?

Home equity is essentially the portion of your home that you own outright.

For example, if your home is currently worth $1,000,000 and your mortgage balance is $400,000, you have approximately $600,000 in equity.

That equity doesn’t necessarily have to remain untouched until you sell your home. Depending on your income, credit, existing mortgage, property value and lender guidelines, you may be able to access a portion of it.

This can potentially be done through options such as:

• Refinancing your existing mortgage
• A Home Equity Line of Credit (HELOC)
• A second mortgage
• Restructuring your current mortgage

The right strategy depends on your individual circumstances.

Using Your Equity to Help With a Down Payment

One of the most common ways parents and grandparents help the next generation is by providing funds toward a down payment.

Let’s look at a simple example.

Your home:

• Current value: $1,000,000
• Existing mortgage: $400,000
• Available equity: Approximately $600,000

You may be able to access a portion of that equity and provide your child with, for example, $100,000 toward the purchase of their first home.

The funds could potentially help them:

1. Increase their down payment

A larger down payment can reduce the amount they need to borrow and, depending on the circumstances, may also help them qualify for a mortgage.

2. Avoid paying mortgage default insurance

If the resulting down payment reaches 20% or more of the purchase price, mortgage default insurance may not be required on a conventional mortgage, subject to the applicable lending rules.

3. Improve their purchasing power

Having additional funds available can sometimes make the difference between being able to purchase a suitable property and remaining on the sidelines.

4. Reduce the financial pressure of buying their first home

The goal doesn’t necessarily have to be giving your children or grandchildren a large amount of money. Even a relatively modest contribution can make a meaningful difference when combined with their own savings.

You Don’t Necessarily Have to Give the Money Away

This is an important distinction.

There are several ways families structure assistance with a home purchase.

Some parents or grandparents provide a gift, while others may structure the arrangement as a family loan that is repaid over time.

There are also situations where parents may act as guarantors or co-borrowers, depending on the lender and the family’s circumstances.

Each approach has different legal, tax and mortgage implications, so it’s important to understand exactly what you’re agreeing to before moving forward.

What About a HELOC?

A Home Equity Line of Credit can be another option for homeowners with sufficient equity.

Unlike a traditional mortgage, a HELOC generally provides access to a revolving line of credit. You can borrow what you need, subject to the approved limit, rather than necessarily taking all of the available funds at once.

For example, if you have substantial equity in your home, a HELOC could potentially allow you to access funds to assist with a child’s purchase.

However, it’s important to remember that the money isn’t free.

You are borrowing against your home, and interest will be charged on the amount you use. HELOC rates are also generally variable, meaning the interest rate can change over time.

The Most Important Question: Can You Afford to Help?

This is where professional mortgage advice becomes particularly important.

As a parent or grandparent, you may want to help your family — but you also need to protect your own financial future.

Before accessing your equity, we need to consider questions such as:

• What is your current mortgage balance?
• What is your home’s current market value?
• How much equity can you realistically access?
• What will your new mortgage payment be?
• Can you comfortably handle the additional debt?
• Are you approaching retirement?
• Will borrowing against your home affect your retirement plans?
• What happens if interest rates increase?
• What happens if your child or grandchild has difficulty making their mortgage payments?
• Is the assistance a gift or a loan?
• Have the legal implications been properly documented?

Helping your family should not put your own financial security at risk.

Don’t Forget About the Future

Many parents and grandparents have spent decades building equity in their homes.

That equity can be an incredibly valuable financial resource, but it is also part of your retirement and long-term financial plan.

Before taking money out of your home, consider what your finances will look like five, ten or even twenty years from now.

For someone who is nearing retirement, adding a significant amount of debt may not make sense.

For someone with substantial equity, strong income and a well-funded retirement plan, however, strategically accessing some of that equity could be a very effective way to help the next generation.

There isn’t a one-size-fits-all answer.

Start With a Conversation

If your son, daughter or grandchild is struggling to save enough for their first home, don’t assume that homeownership is out of reach.

And if you’re a homeowner with significant equity, don’t assume that the only way to help is to sell investments or hand over your savings.

Your home equity may provide another option.

As a mortgage broker, I can review your current mortgage, property value, income and overall financial situation and help determine what options may be available.

I can also work with your child or grandchild to understand how much they may qualify for and how your assistance could potentially fit into their overall financing strategy.

The goal isn’t simply to get them into a home.

The goal is to help the next generation become homeowners without putting your own financial future at risk.

If you’re considering using the equity in your home to help your children or grandchildren purchase their first property, let’s have a conversation before you make any decisions. A little planning today can make a significant difference for your family tomorrow.