Transcript of Video:
Hey, everybody, it’s Rowan Smith at the Mortgage Centre. I want to talk today about something that happens very frequently, which is two parents looking to buy a piece of property, and maybe they can’t quite qualify for it. So they look to stick it into their child’s name as well or bring their child onto the application.
The other reason I see it is because the child has his first-time home buyers’ rights. Maybe the parents have already owned a property, and they’re trying to buy a new property, and it’s going to trigger $6, 000 in transfer tax, so they decide to put it into child’s name instead and put them on as co-signers.
Now, on the surface this may seem like a good idea. Maybe putting your son or your daughter on there right now frees up your money, what could be $6, 000. Perhaps it makes the deal work in the first place because their income, their job is just enough to push you over the edge to get qualified for it.
But there is a consequence to doing this. When you put them on there, they’re losing their rights to first-time home buyers. They’re not going to be able to claim first-time home buyer status, and they’re going to have to go without owning a property for several years before they can do the first-time home buyer RSP withdrawal plans.
So you have to weigh the costs today of saving them, or saving yourself, rather, the cost of the property transfer tax of buying the home in the first place against what you’re going to be taking away from the future. I’ve had many parents had to pay their children six or seven thousand dollars when their kid went to get a property five, 10, 20 years later and was ineligible for the exemption from the property transfer tax. It can add up and can be a lot of money.
So before you do that, at least have a speak with me and consult with me and see if there’s a way we can structure the deal where maybe we put your child on as a co-signer to get the deal done rather than having to put them on title.
Or perhaps there’s different ways to structure the ownership, dividing it up among certain percentages of the owners, so that you can avoid or minimize your property transfer tax. There’s workarounds for this, but just throwing a third party on it, especially a child, is not the way to do it.
So if you’re in that situation, give me a call. For the Mortgage Centre, I’m Rowan Smith.