Co-signing your kids’ mortgage? Here’s why that’s a risky idea – National

More parents are co-signing the mortgages of their adult children, giving them a boost when it comes to buying that elusive first home — but some experts warn the practice comes with its own set of risks.

Of all mortgages issued in Canada to first-time homebuyers, the share of those co-signed by parents rose from around four per cent in 2004 to approximately 11 per cent in 2025, analysis from the Bank of Canada said on Tuesday.

“The practice is especially prevalent in Canada’s largest and most expensive housing markets, such as Toronto and Vancouver, where affordability pressures are most intense,” the report said.

It “enables many adult children to take on larger mortgages than they could afford on their own,” it added.

Co‑signing is also more common among first‑time buyers who are younger and who have lower credit scores and lower incomes, it added.

“We have been seeing a number of parents providing gift money to their kids to buy a house. But not everyone has wealthy parents. Co-signing is a way for most parents to help their children buy a house,” said Kevin Fettig, former Bank of Canada and CMHC economist and president of CMI Financial.

The main benefit of co-signing a mortgage is that it makes it possible for one party to qualify for financing when they otherwise wouldn’t have had the income or credit to do so, said Ratehub.ca mortgage expert Penelope Graham.

It’s important that everyone involved knows what they’re getting into, she said.

“Co-signing a mortgage means being added to the mortgage title and becoming fully liable for mortgage payments. The main risk here is, should your adult children find themselves in a position where they cannot pay their mortgage, you will be financially responsible for those payments,” she said.

On the other hand, younger Canadians who had their parents co-sign should be aware that the co-signing parent will legally have say over the ownership of that home — that means they can weigh in when it comes time to sell, refinance or renovate the home, she added.

Parents who co-sign might be more vulnerable than their kids, said NerdWallet Canada’s mortgage expert Clay Jarvis.

“Blowing a mortgage when you’re 25 is something you can recover from. Paying off two mortgages when you’re in your 50s and trying to prepare for the next 30 years without a salary would scare me,” he said.

Mortgage delinquencies have been on the rise, with Canadian banks setting aside hundreds of millions of dollars in case customers can’t pay off their loans, including mortgages.

Royal Bank of Canada, TD Bank, CIBC, Scotiabank, Bank of Montreal and National Bank all said they’ve topped up their loan loss provisions.

Canada’s total mortgage debt reached nearly $2 trillion last year, according to a report from Equifax, as many more households are expected to apply for mortgage renewals.

“If a payment is missed, both the adult children and the co-signor’s credit history will be impacted. More critically, the financial institution may require the co-signor to cover the mortgage, but also property taxes and homeowner’s insurance,” Fettig said.

For some younger Canadians, having a co-signor was the only way they could have afforded a mortgage in the first place.

The Bank of Canada report found that in 74 per cent of the cases where the mortgages were co-signed, adult children would not have qualified for their mortgages without their parents signing on with them.

It also significantly boosted their purchasing power, the analysis found.

In 2022, the average adult who had their parent co-sign would have been able to afford a $458,000 home without co-signing. Having a parent co-sign meant they were able to afford, on average, a house worth $787,000, boosting their purchasing power by 72 per cent.

The rise in parents co-signing mortgages is yet another sign of the housing market being out of reach for many young Canadians, he added.

“There is some cause for concern, as it speaks to housing market affordability and, to some extent, the state of young Canadians’ financial independence,” he said.

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