A growing number of older people are finding themselves struggling to pay their children’s mortgages.
And the problem is set to worsen as banks encourage families to collaborate financially to circumnavigate tightened lending criteria.
During the last housing boom, many parents helped their kids get into homes.
Financial adviser Kathy Jarrett says often they were convinced by their children’s mortgage broker, real estate agent or banker, ignoring advice from their own advisers.
Commonly they mortgaged their own homes and gifted loan proceeds to their children on the understanding that the kids would be responsible for the repayments.
“But now they’re quietly having to pay themselves, sometimes having to come out of retirement and try to get work,” Jarrett says.
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This generation after the boomers is in a financial bind. The stock market has crashed, housing prices are down and there are very few jobs garnering the big salaries that many took for granted just a few months ago. Expensive cars, luxury items, holidays abroad, fine dining/entertainment, and houses and condos that are beyond the average working salary. The really sad spectacle is the parents of these children worked long hard hours, took few vacations, were frugal in their consumer purchases (repaired what was broken), had meals at home and drove cars past the 10 year life cycle. The children of the boomers will not live as well as their parents and there will be anger and frustration because they have no idea how to downsize.