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Parents using their home to help with a down payment
No spare cash but plenty of home equity? See how much three common approaches could release and what each costs monthly.
1. Home equity line of credit (HELOC)
Could release up to about
$650,000
- About $433/month in interest on this amount
- Lower rate, but monthly interest is due and approval depends on the parents' income.
2. Reverse mortgage (55+)
Could release up to about
$284,000
- No monthly payments; repaid when the home is sold or the parents move.
- Interest compounds: about $218,902 owed after 10 years.
3. Co-borrower / guarantor
Could release up to about
$0
- No cash needed, but the mortgage counts as the parents' debt, limits their future borrowing, and they must pay if the child doesn't.
Tips for parents
- Write a gift letter (not to be repaid) so the lender accepts it as down payment.
- Want it back one day? A documented loan is possible, but it counts as the child's debt; ask first.
- Before borrowing against your home, check your own retirement cash flow.
Estimate: HELOC up to about 65% of value; reverse mortgages up to about 55% (varies by age, home and area); rates are indicative. Ask a professional about taxes, OAS and estate effects.