It looks like the combination of incredible rents, stress test and hot housing market has pushed clients to look for more creative ways to get their mortgage.
Over the past few years, I’ve seen more clients who either add a parent as a co-author of their mortgage, or buy an apartment building with their family where they both live together.
I have noticed that the number of files with gifts from the family has increased.
I have also seen couples who have not been together for a very long time, buying together because one or the other is not suitable for this.
In situations where parents sign a contract, part of the conversation I have with my clients ahead of time is about their exit strategy.
In some cases, we need a co-regent because one client has no established credit history or has poor creditworthiness. In this situation, we are talking about what needs to be done to create a credit history, and we plan to contact the base in two or three years to find out if the co-director can be removed.
In other cases, clients need to work to reduce other debt so that they can go on to qualify without a co-signer.
I always talk about the importance of getting reliable legal advice. The confusion of money and family can go wrong in many ways.
I got a call from a gentleman (not my client) who gave his son and his girlfriend $ 70,000 as a down payment and to cover expenses. Two years later, the son and his girlfriend parted ways, and now she is entitled to half the home equity of the house, which of course includes half of the original donated advance.
Over the past few months, I have worked with several clients who now need to sell their home in order to pay off another person’s capital as they diverge.
Lenders require a signed gift letter stating that the donated funds are a real gift and are non-refundable. This gentleman signed the gift letter, but I’m sure I didn’t expect the relationship to fall apart so soon.
Over the past few months, I have worked with several clients who now need to sell their home in order to pay off another person’s capital as they diverge. Attempts to buy a comparable home sometimes fail.
If you are considering making a down payment or a joint signature for a family, make sure you understand what you are going for and how long you will be doing it. If you are buying a home with an intention to split the capital in the future, set aside time in advance to write a document that lists the “what if” and specifies who will be entitled to what.
Having a difficult conversation ahead of time can relieve pain and hopefully save the relationship if things don’t go according to plan in the future.
This all sounds grim and doomed, and there are certainly situations that can go wrong.
On the other hand, I work with other clients where either the addition of a co-signer or donated equity works brilliantly as a short-term plan to help clients enter the housing market.
For example, I work with clients in northern British Columbia, where my husband moved from Fort St. John to Prince George to get a fantastic opportunity with his current employer. They buy a beautiful new home, the price of which is slightly higher than they are entitled to just his salary.
She is also a professional, but does not work for Prince George yet. They manage their finances well and have a sizable down payment of their own. We add her parents to the app so they can buy right away. As soon as she gets a job and passes the trial period, we will try to exclude the parents from the mortgage loan.
What could be more positive, I saw several articles last week that the housing market seems to be cooling a little. I have felt a slight difference in the pressure some of my customers are experiencing when trying to buy.
I really hope that things will work out and return to the dynamic that was just a few years ago. A more balanced market will give customers time to confidently decide which home is right for them, rather than competing to buy a home that really isn’t right for them.