Real Estate

When does it make sense to add a working child as one of the mortgage borrowers?

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[OP]
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When does it make sense to add a working child as one of the mortgage borrowers?

Once the child is added, does this mean her primary residence will be this property he/she will purchase with his/her parents and that any future property he/she purchases will be considered an investment property?

Will it only make sense if the household wants to borrow potentially a bigger amount? Or are there other reasons?

I'm just asking for a family friend who are shopping a condo/townhouse at the moment and it will be their first purchase.

Thank you.
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May 30, 2005
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I gather it's mostly to borrow a bigger amount, or if the parents would otherwise not qualify for the mortgage. There is absolutely no benefit whatsoever to the child. In fact, they will lose out on their first time home buyer incentives across various government programs.
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Yup, I am one of those child who lost all my incentives when the time came to buy my first house because I helped my parents buy theirs.
If I was living in that house with them until I bought my own place, then I wouldn't mind it. To me the only viable first time buyer incentive is Reduced Land transfer tax, which varies from region to region. I was not planning on using the RRSP for downpayment but obviously it would be different for other people.

With CRA, you can designate which property is your primary residence - https://www.canada.ca/en/revenue-agency ... dence.html
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scorown wrote: Yup, I am one of those child who lost all my incentives when the time came to buy my first house because I helped my parents buy theirs.
If I was living in that house with them until I bought my own place, then I wouldn't mind it. To me the only viable first time buyer incentive is Reduced Land transfer tax, which varies from region to region. I was not planning on using the RRSP for downpayment but obviously it would be different for other people.

With CRA, you can designate which property is your primary residence - https://www.canada.ca/en/revenue-agency ... dence.html
This child is a little over 20 y.o. so after reading Jon and your helpful posts, I searched a little bit and found this. Does this mean anyone of majority age can be one of the borrowers but not elect to have that property to be his/her primary residence?

https://www.moneysense.ca/spend/real-es ... tax-rules/

7. What are the rules regarding designation of a principal residence?
However, for a home to be eligible for the principal residence exemption from tax, you must also adhere to a few other CRA stipulations.

No. 1: One per family

A family unit can only designate one property per year as a principal residence. A family unit is you, your spouse (or common-law partner) and any children under the age of 18.
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alanbrenton wrote: Once the child is added, does this mean her primary residence will be this property he/she will purchase with his/her parents and that any future property he/she purchases will be considered an investment property?

Will it only make sense if the household wants to borrow potentially a bigger amount? Or are there other reasons?

I'm just asking for a family friend who are shopping a condo/townhouse at the moment and it will be their first purchase.

Thank you.
The value of the mortgage will be seen as a debt for the child, so it will greatly hinder if not make it impossible for him to purchase any property of his own in the future.

Would the child actually be living at the home?
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rob444 wrote: The value of the mortgage will be seen as a debt for the child, so it will greatly hinder if not make it impossible for him to purchase any property of his own in the future.

Would the child actually be living at the home?
At least for the next five years I believe.

So to get her out of the mortgage, is it going to be a mess, like a deemed disposition at market value (capital gains tax-free), down the road?

Probably best to leave the child out then.
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alanbrenton wrote: At least for the next five years I believe.

So to get her out of the mortgage, is it going to be a mess, like a deemed disposition at market value (capital gains tax-free), down the road?

Probably best to leave the child out then.
I believe the child would need to be assigned a % share of the home. So if they want to get out of the mortgage/title, it would be a deemed disposition of their % share.

I'm not sure how principal residence designation works on the same home for multiple owners. If the child can also claim the home as principal residence (since they live there) along with their parents, then the disposition would be tax-free anyways. If they claim only a small % share, even if not principal residence the tax impact could be minimal. No matter the % share, I beleive the entire mortgage amount will go on his credit report (hindering future buying) since he would be responsible for entire mortgage should the parents default.

Note that while mortgage is in force it may be impossible to get child off mortgage/title without cancelling the mortgage and incurring lots of fees, or waiting until natural renewal date. Lenders may differ on how this is handled.

In short yes, it is best to not have a co-signer (either parent or child).
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alanbrenton wrote: At least for the next five years I believe.

So to get her out of the mortgage, is it going to be a mess, like a deemed disposition at market value (capital gains tax-free), down the road?

Probably best to leave the child out then.
I went through this process. As @rob444 pointed out, I was not able to buy my own house until my parent's mortgage was off my record. The process involved going through a lawyer. I transferred my ownership % to my mother, free of charge, otherwise I would have been taxed on it.
Only 1 family can use a house as principal residence, which in my case were my parents. So it automatically becomes investment property for me.

Overall I never considered it as an investment property so I didn't use any tax write offs and consequently I didn't pay tax on selling my share to my mother as well.
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My parents added me when i was 18 to the mortgage.
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masarwar wrote: My parents added me when i was 18 to the mortgage.
Did it cause you any difficulty securing your own mortgages if the mortgage with your parents were not extinguished then?

I think it's almost like opening joint LOC's or credit cards where balances appear on card holders and getting dinged twice.

I already shared this thread with my friends so it's up to them but maybe it's best to leave their child out since even with a 5x multiplier, the income is not going to add much and they don't want to stretch their budget anyway when home shopping.
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alanbrenton wrote: Did it cause you any difficulty securing your own mortgages if the mortgage with your parents were not extinguished then?

I think it's almost like opening joint LOC's or credit cards where balances appear on card holders and getting dinged twice.

I already shared this thread with my friends so it's up to them but maybe it's best to leave their child out since even with a 5x multiplier, the income is not going to add much and they don't want to stretch their budget anyway when home shopping.
Oh yes absolutely. when i was ready to buy my own i had to have my name removed from the property and mortgage.
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I would advise against putting the name of the child on the mortgage since you mentioned the income won't add much to what they can borrow. The child will likely need all the rebates they can qualify for when it's time to purchase their own place and every little bit counts be it rebates or the ability to borrow from their RRSP. I don't foresee any major crash anytime soon which would make it affordable for the average person to comfortably buy a house.

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