The Bank of Mom and Dad Comes With a Catch
Roughly one in nine Canadian mortgages now has a parent’s name on it.
That is up from about one in twenty five, twenty years ago, and it is concentrated in exactly the
two markets you would guess. Bank of Canada research published this spring puts numbers on something
every agent in Toronto has watched happen without being able to size.
What a parent’s signature buys
The research is blunt about it. 74 percent of co-signed borrowers would not have qualified
for their mortgage on their own. This is not a rounding of the edges. For three quarters of
these buyers, the parent is the reason the purchase happened at all.
And the size of the effect is larger than I expected.
On their own, these buyers could afford an average home of about $458,000. With a
co-signer, their ceiling rose to about $787,000, a 72 percent increase in buying
power from a signature.
What they actually did with it is the interesting part. They did not go straight to the ceiling.
On average they used about 76 percent of the extra room and bought at around
$709,000. Restrained, but not by much.
The catch, and there is one
The researchers found that the borrowers who used the most of their expanded capacity, the ones
who stretched furthest toward the ceiling, showed the largest later increases in delinquency
on credit products like credit cards and lines of credit.
Which connects directly to other Bank research showing that rising consumer credit stress is the
earliest visible sign of mortgage trouble, appearing about two years ahead of a first missed payment.
A co-signer relaxes what the lender will allow, but it does not change what the household can
actually carry month to month. The qualifying constraint moves. The cash flow constraint does not.
The risk nobody discusses at the kitchen table
About one third of co-signing parents still have a mortgage of their own.
Sit with that. A third of the time, the safety net has its own debt. If the child struggles, the
parent is legally on the hook while already carrying their own housing costs, and both households are
exposed to the same housing market at the same time.
Co-signing is not guaranteeing. A co-signer is a full borrower. The debt appears on their credit
report, it counts against their own future borrowing, and if payments are missed it damages their
credit as well as the child’s.
How to do it properly, if you are going to do it
- Set the number by the payment, not by the approval. The lender will tell you the
maximum. The research shows the risk sits with the people who treat that maximum as a target. Decide
what the monthly payment can be from the child’s income alone, and work backwards. - Write down what happens if it goes wrong, before it goes wrong. Who covers a
missed payment. What triggers a sale. Whether the parent’s contribution is a gift, a loan, or an
ownership share. Families who have this conversation early rarely regret it. - Get independent legal advice, particularly where there are siblings. Co-signing
quietly reallocates family wealth, and estates get litigated over exactly this. - Check the parent’s own position first. If they are within a few years of
retirement or carrying their own mortgage, the co-signature may cost them a refinancing option they
will need later.
A summary of published Bank of Canada research, not legal or financial advice. Co-signing has
real legal consequences that vary with how title and the mortgage are structured. Talk to a lawyer
and a mortgage broker before signing anything.
The honest read
I am not against co-signing. In a market like this it is often the only way a first-time buyer gets
in, and getting in has been the right call for most families over most long periods.
But it should be a deliberate transfer of family wealth with terms attached, not a favour done at
the end of a long approval process because the numbers came up short. The research suggests the
families who get hurt are the ones who used the whole runway just because it was there.
Where This Comes From
This post summarises Bank of Canada research by Shaoteng Li published in April 2026, drawing on “Housing Affordability and Parental Income Support,” Bank of Canada Staff Working Paper 2024-28 by Allen, Carmichael, Clark, Li and Vincent. Both are free on the Bank of Canada website.
Frequently Asked Questions
How common is it for parents to co-sign a mortgage in Canada?
How much does a co-signer increase how much I can borrow?
What are the risks of co-signing a mortgage for your child?
Does co-signing make mortgage default more likely?
Is co-signing the same as gifting a down payment?
Related Reading
- First-Time Home Buyer Guide
- Your Credit Card Slips Two Years Before Your Mortgage Does
- Mortgage Renewals in Canada
- Closing Costs in Ontario
If your family is weighing whether to help and how much, the most useful thing is usually a sober look at what the monthly payment actually is at different price points. Happy to walk through it with both generations in the room, with nothing to sign.