Adding a Child to Title and Mortgage for an Aging Parent in Ontario

Many older homeowners want an adult child on title to help with finances, make a future transfer easier or share the load of caring for a home. It can seem simple: a name on a form. In practice it involves your lender, land transfer tax and real exposure for both of you.

This article explains the main points: getting the lender's agreement, land transfer tax on the change, shared liability, and the risks to think through. It is general information, and a lawyer should look at your specific situation before anything is signed.

Title and mortgage are separate decisions

Title records who owns the property. The mortgage records who owes the lender. You can change one without the other, but lenders usually want a say on both. If your child goes on title while a mortgage is registered, whether the lender needs to agree, and whether your child must also sign the mortgage, depends on your mortgage contract and the lender, so it is worth confirming with a lawyer.

Whether the existing lender will consent, and on what terms, depends on the lender and your mortgage contract. A refinance or switch to a new lender is sometimes used to add a co-borrower. If you switch, the new lender must approve the application and switching may involve appraisal, discharge, registration and legal fees, plus new insurance premiums if the loan amount or amortization increases.

Land transfer tax on adding a child

Many people assume a gift to a child is free of land transfer tax. The Land Transfer Tax Act does not exempt gifts of land, but if no consideration passes in any form, the tax on nil value is nil. Where a mortgage is outstanding, tax is payable on the amount outstanding at registration regardless of the relationship between the parties. The spousal exceptions do not cover parent-child transfers.

For nil-consideration transfers, the land transfer tax affidavit must show consideration as nil and state the relationship of the parties and the reason for the transfer. Land transfer tax is payable when the transfer is registered.

If tax applies, the rates are 0.5% up to $55,000, 1.0% from $55,000 to $250,000, 1.5% from $250,000 to $400,000 and 2.0% over $400,000, with 2.5% on the portion over $2,000,000 for land with one or two single-family residences. Toronto has a separate municipal tax. Ask your lawyer to estimate the cost before you decide.

Liability and risk for both of you

A child who signs the mortgage generally becomes responsible for the debt alongside you, and their credit can be affected if payments are missed. Missing a regular payment is a default and may eventually lead to the forced sale of the home. Under a mortgage's own power of sale clause, the lender must give at least 35 days' notice of intention to sell to everyone with an interest in the property.

Being on title can also expose the home to your child's own money problems. If your child later has creditors, a divorce or a bankruptcy, the property they co-own may be affected. How much depends on the facts, so ask a lawyer. Bankruptcy generally does not affect secured creditors' rights, such as a mortgage lender's.

• Loss of control: your child becomes an owner and may need to sign for a sale or refinance.
• Family conflict: siblings who are not on title may feel left out.
• Your own security: a parent who relies on the home should consider what happens if the relationship breaks down.
• Credit: a co-borrower's missed payments can affect both people.

How you hold title matters

If you hold title as joint tenants, a death leads to a survivorship process. Ontario land registration practice requires a survivorship application with appropriate proof of death, and the survivor's transfer or application removes the deceased from title. For Land Titles properties the application is supported by an affidavit and proof of death.

Holding as joint tenants versus tenants in common has different consequences for your estate, and both interact with your will. A lawyer can explain which fits your goals, including whether another approach, such as a power of attorney or a will, meets your needs without making your child an owner now.

What to do next

• Write down why you want your child on title and what you hope will be different afterward.
• Ask your lender whether it will consent and whether your child must also sign the mortgage.
• Ask a lawyer to estimate land transfer tax, including whether a mortgage is outstanding at registration.
• Talk with your child, and with other family members, about expectations before signing anything.
• Consider independent legal advice for each person, since your interests may differ.
• Review your will and powers of attorney at the same time.

Frequently asked questions