In Vancouver’s Kitsilano neighborhood, Michelle Weaver watches her 28-year-old son receive keys to his first condo—a milestone that wouldn’t have happened without her signature on the mortgage documents. “I never imagined I’d still be financially responsible for him at this stage,” she says, glancing at the mountain view from his new balcony. “But without co-signing, he’d be renting for another decade.”
This scene is playing out across Canada as housing affordability reaches crisis levels, particularly in metropolitan centers. First-time buyers increasingly turn to the “Bank of Mom and Dad” not just for down payments but as co-signers on mortgages—a trend that financial experts warn carries substantial risks that many families fail to appreciate.
“The emotional decision often overshadows the financial reality,” explains Raj Patel, mortgage broker at Vancouver’s Meridian Financial. “Parents see their adult children struggling against sky-high prices and want to help. But they’re legally binding themselves to potentially hundreds of thousands in debt without fully understanding the implications.”
The math explains the surge in parental assistance. With the average home price in Greater Toronto hovering near $1.1 million and Vancouver at $1.2 million, a typical first-time buyer would need a household income exceeding $200,000 to qualify independently—well beyond what most young professionals earn.
Co-signing allows lenders to consider the parents’ income and credit history alongside the child’s, dramatically increasing borrowing capacity. However, this arrangement means parents remain equally responsible for the entire debt—a crucial detail that many families gloss over during the excitement of homebuying.
Financial advisor Melanie Chen points to three critical risks that parents often underestimate: “First, co-signing affects your debt service ratio, potentially limiting your ability to borrow for your own needs. Second, any payment issues affect everyone’s credit score equally. And third, parents risk their retirement security if the child can’t maintain payments.”
These concerns aren’t theoretical. The Canadian Bankers Association reports that approximately 8% of mortgages experience payment delays annually, and with interest rates substantially higher than the 2021 lows, financial strain has intensified for many households.
For empty-nesters John and Laura Sullivan of Calgary, co-signing seemed like a straightforward way to help their daughter enter the housing market two years ago. “We didn’t realize it would complicate our own plans to downsize,” John explains. “When we applied for a mortgage on a smaller property, we were shocked to learn that lenders considered us already leveraged to our maximum.”
Beyond the financial mechanics, family dynamics add another layer of complexity. Relationship counselor Dr. Amrita Singh notes that money and family make for a volatile mix: “I’ve seen co-signing arrangements destroy relationships when financial stress arises. Clear boundaries and explicit agreements about responsibilities are essential but rarely established upfront.”
Legal experts recommend documented agreements that address scenarios like job loss, relationship breakdown, or property sale. “Without written terms, these situations become legal and emotional minefields,” warns Toronto real estate attorney David Goldstein. “I’ve seen families torn apart fighting over property when the initial goodwill evaporates.”
For parents contemplating co-signing, mortgage specialist Jessica Williams recommends a more conservative approach: “Consider gifting a larger down payment instead. This helps the child qualify for a smaller mortgage they can handle independently, protecting everyone’s financial future while still providing meaningful assistance.”
Some families find creative alternatives. The Patels of Mississauga established a formal lending arrangement with their son, providing a private second mortgage at below-market rates. “We documented everything legally,” explains Vikram Patel. “This keeps our finances separate but still provides significant help.”
Financial institutions have noticed the trend, with some developing products specifically for family mortgage situations. TD Bank’s Family Transfer Program and RBC’s Family Guarantee option provide structured approaches to familial lending, though critics argue these programs primarily benefit the banks by expanding their customer base while families shoulder the risk.
As Canada’s housing affordability challenges persist, financial experts emphasize the importance of clear-eyed assessment before co-signing. “The desire to help your children is natural,” says Chen, “but securing your own retirement must remain the priority. You can recover from many financial mistakes, but a retirement shortfall rarely has a solution.”
For those determined to assist the next generation into homeownership, the consensus among professionals is clear: proceed with caution, get everything in writing, and ensure everyone fully understands the long-term commitment. Otherwise, that dream home might eventually house family resentment alongside equity.
As Michelle Weaver puts it, watching her son arrange furniture in his new living room: “I’m thrilled to help him build his future. I just hope we’ve structured this so it doesn’t compromise mine.”
