Your adult child can't afford a house on their own. You have value built up in yours. Here's how the two fit together, and how you can help them build wealth without touching your savings.
How it works
You, the parent, become the bank
You borrow against your own house with a home equity line of credit (HELOC) to cover the down payment and closing costs. Your adult child gets into the market without waiting years to save up.
Buy a house with a legal income suite (secondary unit)
A detached 3-bedroom house with a 1 or 2 bedroom basement apartment. Two front doors, two incomes.
Your adult child lives in one unit, a tenant pays for the other
The rent covers the mortgage, taxes, insurance, utilities and the payment back to you. Your adult child pays about what they would pay in rent anyway, except now they own the house and they're the tenant's landlord.
Ownership: 99% your adult child, 1% you, the parent
Your name is on the title with your adult child to protect your loan. All the growth goes to your adult child, and because it's their main home, that growth is usually tax-free when they sell.
A real example: $700,000 purchase price
Detached 3 bedroom upstairs + 2 bedroom downstairs. 10% down as a first-time buyer, with the $4,000 land transfer tax rebate.
What you, the parent, put in
You don't hand over cash from your savings. You borrow $80,000 against your own house using a HELOC (home equity line of credit). A HELOC is money the bank lets you borrow because you've already paid off a big chunk of your home. Think of it like a credit card backed by your house.
That $80,000 covers two things for your adult child:
| 10% down payment on the $700,000 house | $70,000 |
| Closing costs (lawyer, land transfer tax after the $4,000 first-time buyer rebate, etc.) | $10,000 |
| Borrowed on the parent's HELOC | $80,000 |
Each month you only pay the interest on that $80,000, about $330. The rent from the house covers it (see below), so it costs you nothing out of pocket. The $80,000 itself gets paid back to you later on, for example when the house is sold or a new mortgage is set up.
What comes in each month
| Tenant, main floor | $2,800 |
| Adult child, basement | $2,000 |
| Total in | $4,800 |
What goes out each month
| Mortgage | $3,130 |
| Property tax | $500 |
| Home insurance | $150 |
| HELOC interest payment back to the parent | $330 |
| Utilities (both units, estimated on the high side) | $440 |
| Total out | $4,550 |
The house pays for itself, plus another $250 per month, $3,000 per year for any upcoming repairs.
Where you are in 5 years
Mortgage paid down
Over 5 years, your adult child makes 60 mortgage payments of $3,130. Most of that money is interest, which is the bank's fee for lending the money. The bank keeps it. But part of every payment goes toward paying off the loan itself, and that part becomes your adult child's ownership of the house.
| Paid to the bank over 5 years (60 × $3,130) | $187,800 |
| Interest. The bank keeps this. | $126,160 |
| Loan paid off. This is now your adult child's share of the house. | $61,640 |
Each year the split gets better: a little less goes to interest, a little more goes to paying off the loan.
The house goes up in value
If the house goes up a modest 3% a year, it's worth a lot more in 5 years. That growth belongs to your adult child.
| Purchase price | $700,000 |
| Value after 5 years at 3% a year | $811,500 |
| Growth. Your adult child keeps this. | $111,500 |
in new value built up from an $80,000 loan from you, the parent.
216% return over 5 years. That's over 43% a year, all going to your adult child. And you get your $80,000 back.
Example only. These numbers are estimates based on a $700,000 purchase with 10% down, a 5-year fixed mortgage at about 4.09% paid off over 30 years, and a HELOC at about 5%. Rates, rents, taxes and utility costs vary from house to house and change over time. Home values can go down as well as up. The tax-free rule for a main home may not apply to the rented part of the house. Talk to your mortgage broker, lawyer and accountant before going ahead. The $80,000 is a loan, not a gift, so your mortgage broker will set it up with the lender that way.