Finance a home, multi-generational

Financer une maison multigénérationnelle

A reader, who wishes to leave his parents out of their NURSING homes, asks how does the financing of a house, multi-generational.

Pushed by the confinement and the prospect of a second wave of the outbreak of the virus, our reader wishes that he and his parents live in the same house, but in separate dwellings.

Make a loan

In the eyes of the lenders, the funding mechanism of a house, multi-generational is equivalent to the financing of a single family home. The rate of interest and the award criteria remain the same and the loan is granted to you based on your credit file, the value of the home as well as your payment capabilities.

The only peculiarity is that you have the opportunity to share the responsibility of mortgage financing between several generations of owners. But you are not obligated to do so. Here are the two options available to you.

Option 1 : Purchase a condominium

More than two persons may be joint owners of the same house, for example you, your spouse and your parents.

If you opt for this mode of detention, it is important to put on paper the rights and obligations of co-owners. To do this, a notary will be able to help you draft a contract of undivided co-ownership. In the interest of fairness, it must also be the question of the succession.

Option 2 : Purchase a revenue property

This option assumes that a single generation is the owner of the house and therefore assumes the full load of the mortgage. In return, they may receive a rent from the other. The rent could be used to pay part of the mortgage as well as a portion of the maintenance costs. This option may be interesting in cases where one of the parties does not have the financial capacity to purchase a mortgage. Here also, the question of the succession should be settled in advance.

TIPS

  • Keep in mind that a house, multi-generational, it takes more time to sell and costs 15 % more expensive (on average) than single-family homes.
  • The municipal standards may vary from one municipality to another. Before undertaking the construction or adaptation of a house, multi-generational, the first step should be to verify the standards with the municipality.
  • Plan for the exemption of the capital gain on the resale. If your home is considered a revenue property and you receive rent, the portion of rental income could be excluded from the exemption of the capital gain.
  • See the advice of a specialist (including a tax) what is the best option depending on your situation.

Ghislain Larochelle is a professional registered with the Order des ingénieurs du Québec as well as to the OACIQ.

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