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First-Time Home Buyers Expecting Financial Help from Family, Friends

First-Time Home Buyers Expecting Financial Help from Family, Friends
3 min. read

Photo: Volodymyr Kyrylyuk / Shutterstock

Canadian first-time home buyers are anticipating financial gifts of over $100,000 from relatives and friends to help them with the purchase of their new home, study finds.

Financial Help Expected to Enter the Market

According to a recent report put together by Pollara Strategic Insights for the Bank of Montreal (BMO), about 25% of surveyed first-time home seekers said they were expecting a financial gift between $5,000 and $50,000 to buy their new home. 10% were relying on much more than that – $100,000 or above. For those looking at the more expensive Ontario real estate market, the percentage was even higher (13%), a Bank of Montreal spokesperson told The Star.

BMO’s Head of Personal Lending and Home Financing Products, Hassan Pirnia, noted that many respondents indicated they were expecting financial help from family or friends to balance household debt and rising interest rates.

“Up against external headwinds, parents and family members are being asked to help first-time buyers enter the real estate market.”

However, he noted that while a financial gift is helpful, it was important first-time home buyers afford their purchase in the long run.

“It comes down to ensuring that the home buyer can sustain the costs of homeownership on their own.”

Researchers also discovered that millennials were expecting more financial help than Generation X, the demographic cohort before them. Survey results revealed that millennials were looking for over $61,000 in financial gifts. That was about $20,000 more than Gen Xers.

Views on Housing Affordability

Despite this, 42% of buyers looking for their first home considered that the housing market was affordable. That number varied depending on where in the country they were residing. Of those living in Ontario, 32% indicated they thought the local housing market was accessible. From the BC residents that were surveyed, 34% said the same for British Columbia real estate.

One explanation for the optimism of would-be homeowners may be the financial incentives offered by the government.  Pirnia noted:

“While not every Canadian sees the market as affordable, it’s clear that home ownership is still the goal. We generally expect that Canadians will get a bit of reprieve from rising rates, so the market for first-time buyers is more favourable.”

Incentives for First-Time Home Buyers

The first incentive that the government has put in place to help first-time home buyers refers to a tax credit. This one-time tax credit can even be used by those who have had a house gifted to them in the last tax year. There are several types of homes that qualify, including mobile homes, condos and single-family dwellings.

The second program the government has introduced is the First-Time Home Buyers Incentive (FTHBI), to help ease the financial burden for home buyers. FTHBI benefits are two-fold, according to the Canadian Mortgage and Housing Corporation (CMHC). These include ensuring that first-time home buyers are financially equipped and capable of making mortgage payments and that they are freeing up rental property.

By requiring homeowners to undergo a stress test, which examines their capability to pay if the interest rate increases, and setting precise requirements about household income and maximum borrowing, the FTHBI has been designed to help Canadian millennials get into the real estate industry.

One other advantage millennials enjoy is that many have the option to live rent-free in their parent’s home while they save up for a down payment on their first home. The BMO report also found that 36% had plans to share the cost of their home purchase with another person.

The study surveyed 801 Canadians who were in the market for their first home. They were all expected to buy a property in the next year.

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