What happens if my parents co-sign a mortgage for my first home in Ontario?

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KPA Lawyers - June 21, 2020

It is not uncommon for first-time homebuyers to have a co-signer on their mortgage. Having said that, if you are a first-time homebuyer, having a co-signer could impact the first-time homebuyers land transfer tax rebate available to you.

My first suggestion would be to have your co-signer act as a guarantor as opposed to a co-borrower on the mortgage. This does not require the co-signer to appear on title and the full rebate can be applied.

If the co-signer must appear on title, another option is to create a bare trust agreement between the co-signer and yourself. This will explicitly state that the co-signer has no beneficial interest in the property and will allow for your co-signer to apply for a refund of the rebate after closing provided they submit a letter from the bank confirming that they are on title for mortgage purposes or a copy of the bare trust agreement to the Ministry of Finance. The bare trust agreement will also protect your co-signer from future tax consequences (e.g. capital gains tax).

If you have questions about real estate law in Ontario, feel free to speak with Barbara Kaye for free.

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