How Parents assist their children to become home owners in Vancouver?
How Parents assist their children to become home owners in Vancouver?
The fact is that Vancouver is one of the few remaining major cities in the world that we can still afford to own a house despite how we view our high housing prices. The rest of the world is accustomed to live in their concrete high rises in the downtown core. According to all the reports we have been reading including the latest statistics from the Real Estate Board of Greater Vancouver which you can view on http://www.tinamak.com/Vancouve
Can parents help their children with their down payment?
This is a great idea since a lot of the parents have been living in their home for decades and have built up a large amount of equity which may be just sitting their. This may be a good time to liquidate some of your equity by taking a credit line against your property so you can help your children on their downpayment and save the huge CMHC insurance premium. Charge your children an interest rate equal to your line of credit interest rate(that is usually around prime rate) so that you are not out of pocket each month. In time when the property goes up in value, they will be able to refinance and pay you back this amount.
What is the advantage of getting credit line?
You only pay interest on the amount you use. If, for example your home is worth $600,000 and is clear title, you would be able to get a line of credit of about $450,000. But if your kids only need $150,000 as a down payment, you only pay interest on the $150,000. What you do with the remaining $300,000 is up to you but make sure you do do not squander it away. You now have an option of purchasing your own revenue property. To help your children to make a 20% down payment, although they will be paying the interest on your line of credit, they are saving a lot of money by getting a conventional mortgage vs a high ratio mortgage and having to pay that 3 % insurance premium.
Stay tune for next week, I'll be talking on how to take advantage of today's market to become a home owner.
