How to buy your child's university or college home - smart mortgage tips from mortgage broker Ingrid McGaughey

How to buy your child’s university home: smart mortgage tips

How to buy your child's university or college home - smart mortgage tips from mortgage broker Ingrid McGaughey

Financing a home for your university or college student

As your child embarks on their college or university journey, the idea of providing them with a second home near campus is undoubtedly appealing. A place they can call their own, a cozy haven where they can study or hang out with friends, and perhaps a nice financial profit for you down the road. But, before you dive in, it’s important to understand the unique aspects of this purchase. You’ll want to buy your child’s university home or college home as advantageously as possible.

How to buy a home for your university-bound child: 6 key points

1. Evaluate your financial capacity

If you’re considering financing a second home for your university- or college-bound child, you first need to take a clear look at your own financial situation. Assess your existing mortgage and home equity line of credit if you have them, any other debts you have. Include car loans or leases, balances on credit cards, and any other financial obligations you have. As well, start thinking about where your down payment would be coming from. Evaluate how much, ideally, you’d like to invest into the property versus how much you’d like to borrow toward the purchase of the home for your college or university child.

2. Review your homebuying options with an experienced mortgage professional

Working with a mortgage broker can be extremely helpful in understanding your mortgage options. Getting personalized advice is crucial… There may be several ways to achieve your goal of buying a comfortable abode for your uni or college child. You might want to finance the entire purchase and put no money toward the down payment, or only put a 5% down payment toward the purchase, for example. Collecting information and understanding your options is valuable in helping you to make informed choices about your budget and mortgage game plan. A broker can also assist you. They’ll review your credit history, organize the documents you’ll need, and figure out the best lenders for your specific situation. If appropriate, they can also assist with obtaining a mortgage pre-approval.

3. Account for additional costs beyond the mortgage

Beyond the mortgage payments, remember to prepare for additional costs associated with owning a second home. These include property taxes, insurance, maintenance, utilities, and snow clearing or grass cutting costs. Hopefully you’ll be able to get your uni- or college-bound student to look after a few of those. Either way, you’ll want to be very clear on who pays for what.

4. Figure out your plan for renting your child’s university home

If your child plans to have roommates or sublet the property during university breaks, you’ll need to discuss who you’ll rent to, how much you’ll charge, do’s and dont’s, and so on. You can find Ontario lease examples and other info valuable for landlords at the government of Ontario website to get you thinking about various considerations and responsibilities in this area. From a financial perspective, it is a good idea to budget for potential vacancy so that you are not 100% reliant on rental income.

Owning a second property in Canada has tax and legal implications. It’s important to research and understand any potential tax deductions, exemptions, or responsibilities related to owning a second home. Consulting with your lawyer and your accountant should provide clarity on these points.

6. Figure out your long-term plans for the property

While buying a second home for your college or university-aged child can be a thoughtful investment, it’s important to consider the long-term implications. Reflect on how the property fits into your overall financial goals and your child’s future plans post-graduation. Will you be keeping the property and continuing to rent it? If so, whose job will it be to maintain it, organize renters, and manage the associated work? Figuring this out in advance will help avoid stress down the road.

How to buy your child’s university home: conclusion

Buying your college- or university-bound child a second home near campus can be a great way to support their educational journey. However, making this decision requires careful financial assessment, thorough research, and a solid understanding of your game plan. By evaluating your financial capacity, exploring mortgage options, and having an open discussion with your child, you can make informed decisions and navigate the process with confidence.

Have questions?

Please feel free to get in touch with me if you would like to talk about your own situation. I’m happy to help!

[c] photo from shutterstock

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