Home sweet loan
It’s no surprise that a growing trend in family financial aid is driven by the cost of housing. Thirty years ago, the average Canadian home cost 4.9 times the average family income. The same house today will cost the average family 8.4 times more than they earn.1 And the median sale price for single detached home on Vancouver Island was $835,000 in the first quarter of 2025.2 Which puts some context around a 2024 CIBC survey that showed 31% of first-time home buyers in Canada received financial help from family members, up from 20% in 2015. The average gift was $115,000, up 73% from 2019. Fewer “moving up” from their first home had help (12%), but the average amount was higher, at $167,000. 3
That’s national data, and the numbers leap higher in BC and Ontario, the two priciest real estate markets. The home price to income ratio for Vancouver in 2024 was 14.4 times, compared to 8 times back in 1994. In both provinces 36% of first-time home buyers received family help in 2024. Yet the average amount in BC was $204,000, far above the $128,000 in Ontario. And for those moving up in Ontario, the average gift was $189,000 while in BC it rang in at a hefty $230,000.4 The Bank of Mom and Dad is generous.
And it’s not only real estate. Education and wedding expenses are longstanding focuses of family giving, and RESPs often grow with contributions from grandparents. Helping out with major purchases such cars is also common as are plane tickets home for special family celebrations.
There’s today – and tomorrow
But providing adult children with too much money too soon can have unintended (and unwelcome) consequences. Younger adults can get sidetracked from charting their own course in life and developing personal financial responsibility. This may lead to poor choices that can weigh on adult children when, inevitably, they’re “on their own” one day. There’s also the risk of a marriage ending and gifted assets leaving the family.
Yet as the sums get larger an important consideration is any potential impact on your own financial health, which could include paying substantial long-term care costs one day, either in home or residential. This may be difficult to quantify when aged 50-60, fit, and still earning employment income, but average human lifespans are growing, and not necessarily in terms of years spent in good health. Our retirement savings may need to stretch further than we think.
Clarity matters
Whatever the situation, it’s important for everyone involved to be clear on whether the money is a gift, loan or early inheritance. There can be implications of each for family dynamics and your own tax and estate planning. Getting professional advice is a good idea.
Some common approaches include:
A gift
The is the easiest, most popular and there are no taxes on cash gifts in Canada. That said, it’s prudent to keep a record of any cash gifts for future reference in case you want to review when, why and how much you gave to which child or grandchild. This can also help resolve any issues that may emerge later about fairness and equity between siblings during your lifetime or as part of your estate planning.
A loan
In some situations it is preferable, for personal or corporate reasons, to structure and document a financial transfer as a loan. It may or may not be interest free or include a repayment schedule, but the immediate result is the same as a gift – a sum goes to the adult child. Specific instructions about the loan should be included in your will to prevent any misunderstandings in the future. For example, you may choose to instruct your executor to forgive the loan upon your passing but account for that in bequests to your heirs.
Partnering
If it’s specifically for buying a house some parents choose to become co-owners with their adult child. This allows parents some input on the purchase and some legal protection. If there is a mortgage (payments for which the adult child would typically be responsible) then a parent on title will be registered as one of the borrowers. Meaning that if the adult child defaults the parent could be responsible for repaying the full mortgage amount owing, either personally or by selling the property. On the other hand, there’s also the possibility of a future capital gains tax liability for a co-owner, assuming the home is not their own principal residence.
Conclusion
Helping adult children is usually done with the best intentions and parents and grandparents often act based on their own experience of life’s pivotal moments. However, it’s wise to look carefully at your own financial affairs first, particularly retirement savings and investments, tax, and estate planning before making a significant family gift. For example, is the funding source you have in mind the most tax efficient option? What might the impact of a gift be on your longer-term retirement plan? Reviewing these details in advance with your investment and legal advisors can help avoid any unintended consequences for your own financial security later in life.
Sources
1 https://rates.ca/resources/then-and-now-how-much-more-expensive-it-buy-home-2024-vs-1994
2 https://creastats.crea.ca/mls/vani-median-price
3 https://economics.cibccm.com/cds?ID=11e97bc7-dc7b-4024-b25d-479342219db4&TYPE=E
4 https://economics.cibccm.com/cds?ID=11e97bc7-dc7b-4024-b25d-479342219db4&TYPE=E