More Canadians are co-signing mortgages with parents and that comes with risks
It’s become more common for Canadians to learn on the bank of mom and dad to afford mortgages over the past two decades, according to a new report.
The Bank of Canada analyzed mortgage contract data and credit data from TransUnion, focusing on mortgages granted to first-time homebuyers who are under 50 years old.
It found that Canadian parents co-signing mortgages with their adult children have spiked since 2004. While buyers have been able to purchase more expensive homes as a result, the report argues that co-signing “can also make household finances more vulnerable, which in turn poses risks to financial stability.”
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More parents co-signing mortgages amid rising housing prices
The report said that home prices have risen faster than incomes over the past two decades, also resulting in mortgage qualification rules becoming stricter.
“Together, these circumstances have left some first‑time homebuyers unable to qualify for a mortgage and enter the housing market. Because of this, many have turned to their parents for help,” explains the Bank of Canada.
To qualify for mortgages, borrowers must be able to make a minimum down payment and be able to prove that their income can cover both their monthly debt payments and their housing-related expenses.
The analysis found that of all mortgages issued to first-time homebuyers in Canada, the share of those that are co-signed with a parent has risen from four per cent in 2004 to 11 per cent in 2005.
TransUnion and Bank of Canada calculations
“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,” reads the report. “Co‑signing is also more common among first‑time buyers who are younger and who have lower credit scores and lower incomes.”
A 2025 report found that the number of first-time homebuyers rose as receiving financial help from parents became a more common practice.
Canadians who can’t afford a mortgage on their own are reaching out to their parents, who can help their adult children cover the down payment by gifting them money. They can also help their kids meet the income requirement by co-signing a mortgage.
“In doing so, they add their income to their children’s income and provide the lender with greater legal assurance about repayment,” explained the report.
“Co‑signing not only enables first‑time homebuyers to more easily qualify for a mortgage, but it also allows them to qualify for larger loans and purchase more expensive homes than they could on their own.”
How purchasing power is increased by parental co-signing
According to the Bank of Canada, if parents had not co-signed their adult kids’ mortgages, 74 per cent of those homebuyers would not have qualified for their current mortgage.
The central bank analyzed the fourth quarter of 2022 to see what those buyers would’ve been able to afford without help from mom and dad. It found that they would have been able to afford, on average, a $458,000 home.
“Having a parent co‑sign on a mortgage raised their maximum attainable house price to $787,000. This means that parental support increased purchasing power by about 72 per cent,” reads the report.
The Bank of Canada noted that most adult children who had a parent co-sign took advantage of this extra purchasing power by buying homes that would have otherwise been out of reach.
TransUnion, regulatory filings of Canadian banks and Bank of Canada calculations.
“As a result, the average purchase price of a home for these buyers in the fourth quarter of 2022 was $709,000 — about 55 per cent or roughly $250,000 more than the maximum these buyers could have afforded on their own,” reads the report.
In comparison, in the same period, the analysis found that the average purchase price among first-time homebuyers without parental co-signing was $628,000.
“This suggests that many of the first‑time buyers with co‑signed mortgages would likely not have been able to afford their desired home without a parent’s signature on the mortgage,” explained the Bank of Canada.
The financial risks of parental co-signing
The report argued that while parental co-signing can make homeownership more accessible to adult children, it can also lead to financial instability.
According to the Bank of Canada, this is because co-signing enables many adult children to take on mortgages that they probably couldn’t afford on their own.
“The financial positions of both the first‑time buyers and their parents matter. Co‑signing can leave both parties more vulnerable to a sharp deterioration in either party’s financial situation,” reads the report.
The analysis found that adult children could become financially vulnerable depending on their use of the extra spending room that parental co-signing enables.
The central bank suggested that buyers with the highest utilization rate tend to have the largest average increase in delinquency rates on credit cards or lines of credit.
“In other words, stretching further to buy a more expensive home appears to be associated with a higher risk of financial stress later on,” explained the report.
TransUnion, regulatory filings of Canadian banks and Bank of Canada calculations.
According to the report, parents who co-sign are also vulnerable to financial risks.
“Around one‑third of parents who co‑sign a mortgage already have a mortgage of their own. By co‑signing, they increase their exposure to the housing and mortgage markets and may face financial pressure if their children run into repayment difficulties,” explained the Bank of Canada.
Co-signing parents are legally required to cover their children’s mortgage payments if the child cannot.
Are you a first-time homebuyer who had to get your parents to co-sign in order to qualify for a mortgage? Share your story with us at trending@dailyhive.com.