Buying a home has become a challenge for many young people, but there are a few options that can help you!
When does it make sense to include your parents?
Adding your parents to the mortgage can be a good solution when:
- Your income is insufficient to secure the desired financing
- You want to increase your borrowing capacity
- You want to improve the debt-to-income ratio presented to the bank
- You have a recent employment contract or less job stability.
By combining the incomes of two people, it may be easier to meet the criteria required by financial institutions.
What are the advantages?
Having your parents as co-borrowers can allow you to:
- Increase the likelihood of mortgage approval
- Secure financing for a higher amount
- Obtain better financing terms
- Improve the bank’s assessment of your financial capacity
But there are some things to keep in mind...
It’s important to remember that the co-borrower assumes the same responsibilities toward the bank. This means that:
- Both are responsible for making the payments
- The loan will appear on both borrowers’ credit reports
- Any default can affect both of them.
In addition, the co-borrower’s age may influence:
- The maximum loan term, depending on each bank’s policy
- They may not be eligible for the public guarantee, as this benefit is intended for young people up to age 35
Is being a guarantor the same thing?
No.
A second borrower is a party to the loan agreement from the start and is responsible for the loan.
A guarantor, on the other hand, is only called upon to intervene if the borrowers fail to meet their obligations to the bank.
These are different roles with distinct impacts on the credit analysis.
Are there alternatives?
If your income isn’t sufficient, it isn’t always necessary to turn to your parents.
Depending on your profile, it may make sense to:
- Choose a property with a price better suited to your budget
- Increase the down payment
- Reduce other debts to improve your debt-to-income ratio
- Compare offers from various banks through a mortgage broker
Every situation is different and should be analyzed on a case-by-case basis.
What’s the best option?
Including your parents as co-borrowers can make it easier to get a mortgage approved, but it also entails responsibilities for both parties.
Before making a decision, it’s important to understand which solution is best for your situation and to compare different scenarios.
At Aprova, we help you find the best solution for buying a home.
Try our Calculators to see how much you can finance, or contact our team via the contact form to receive personalized advice.