Over the past several years, challenging economic conditions and skyrocketing prices have prevented many Canadians from achieving crucial life milestones without external financial assistance.
This situation has led to an upward trend of Canadian Baby Boomers providing monetary gifts to their adult children, enabling them to achieve home ownership, start a family, jumpstart their own business and more.
HomeBridge, a newly launched digital solution from HomeEquity Bank, addresses this evolving market dynamic by helping Canadians aged 55 and over to support their adult children through leveraging their existing home equity.
Steph Morgan, Managing Director of HomeBridge, offers expert insights on facilitating intergenerational wealth transfer and providing Canadians with a modernized approach to establishing a living legacy.
What are the economic factors that led to the launch of HomeBridge?
SM: Between 2023 and 2026, an estimated one trillion dollars is projected to transition from Canadian Baby Boomers to their Gen X and Millennial heirs, the greatest wealth transfer in the country’s history. While this wealth is traditionally passed down through an inheritance, there is a growing trend of Canadians looking to establish a living legacy.
Last year, HomeEquity Bank saw a 15.5% increase in new reverse mortgage holders reportedly using funds for gifting purposes – allowing them to give wealth to their loved ones during their lifetime. In response, we created HomeBridge to offer an efficient process for parents and grandparents to gift through their home equity, putting them in the driver’s seat of establishing their living legacy.
What led you to take the helm at HomeBridge and be a champion for establishing a living legacy?
SM: I have been in the tech and finance space for over two decades, building and operating technology-enabled businesses and products, both in startup environments and within large, global corporate environments. What drew me to HomeBridge was its mission of helping create a living legacy for Canadians 55+ and their families.
As a mother of two, I am constantly considering how I can help my children achieve their dreams, and set them up for success later in life. I am sure this is top of mind for many Canadian parents, especially in today’s economy where affordability is an ever-growing pain point.
For Canadians 55+ who are looking for ways to help their adult children and grandchildren, gifting through home equity is an often-overlooked solution that allows homeowners the financial flexibility to assist their adult children without impacting their current standard of living.
Is leveraging their home equity a good solution for every homeowner?
SM: Tapping into your home equity is a great solution for many homeowners, but there is no one-size-fits-all solution. HomeBridge is ideal for Canadians 55+ who are retired (or are considering retirement), whose wealth is locked into their home equity, and who want to be able to gift funds to their adult children while still being able to age in place.
The gift is not taxed, and clients do not have to make any regular monthly mortgage payments. Every HomeBridge loan comes with the CHIP Reverse Mortgage No Negative Equity Guarantee, which means the amount homeowners will have to pay on the due date will not exceed the fair market value of their home, as long as the conditions of the loan are met. Homeowners also have the potential to benefit from appreciation during the loan’s lifespan, depending on market conditions.
For older Canadians, what is the impact of gifting money during their lifetime as opposed to a traditional inheritance?
SM: Statistics Canada revealed that in 2022, 38% of young adults (aged 20 to 29) did not believe they could afford to have a child in the next three years, while 32% did not believe they would have access to suitable housing to start a family in that time frame. Since that time, affordability has gotten even worse, and the rising cost of living means that many Canadians will not be able to achieve key life goals without outside financial support.
A 2024 CIBC Report revealed that 31% of first-time Canadian homebuyers received financial help from their parents to purchase their property. Therefore, by establishing a living legacy, parents can help their adult children when it would be most impactful, and they can personally witness how their support benefits their loved ones. Additionally, there is potential for capital gains tax considerations with a traditional inheritance, whereas a down payment gift from tapping into home equity is tax-free.
When should parents start discussing inheritance and financial support with their kids?
SM: Parents should have open, age-appropriate conversations with their children about finances starting when they’re young. It teaches children financial basics and good money habits from an early age, and as they grow older, allows the parents to understand their children’s life goals and financial health as they reach adulthood. Consequently, it enables parents to see exactly when a financial contribution would help their adult children the most – from help with a down payment to paying for childcare to funding their own business.
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