Contents
It can be disheartening if you’re struggling with the ability to buy a home by yourself or your partner. While in time, the market may be in a better place for you to buy, perhaps you are determined to purchase right now. With some close friends and family by your side, co-owning a property might be the right move for you. This option allows buyers to shoulder the costs of a mortgage and other homeowning fees, making owning a home more possible than before.
There are two main types of co-owned property mortgages, but realistically, there’s so much more information to understand before diving into this type of loan. With plenty of considerations at hand, let’s explore what you need to know before deciding to co-own a home.
There are two kinds of joint mortgages available to Canadians. It is important to differentiate between the two as the ownership percentage for each buyer varies.
A joint tenant mortgage is a common option for friends or couples who want to purchase a home together where things are equal. In this case, every co-owner divides the mortgage between themselves, resulting in the same amount of ownership share. It is worth noting if you want to sell, renovate, or refinance the home, that you’ll need all other co-owners approval before doing so.
This type of joint mortgage might be used by many different parties, including business partners, family, and friends. The distinction between this type of mortgage and a joint tenant is that not every co-owner has an equal share in the home. Their share depends on the amount of money they put towards the house.
While a joint mortgage might seem like the best option for your situation because it can offer less financial stress, it can also come with some challenges that owning a home alone does not present.
If you are pooling your resources together with others, you’ll end up with a larger down payment for the homes in your price range. You’ll still need to save a minimum of 5% (please note for homes valued at $500,000 or more a larger minimum down payment is required), but if your amount exceeds 20%, perhaps you’ll even begin to look at higher-valued houses with more square footage than you could previously afford. Additionally, that higher down payment will help lower your CMHC fees or eliminate them altogether. Property taxes can be split between co-owners, and expenses such as hydro and internet can also be divided equally.
There are some potential downsides of co-owning a home as well. This includes missed payments from other owners, which will have to be supplemented by the other co-owners if someone cannot pay their share. When handling the property, you may have differing opinions and struggle to come to a resolution. This can be particularly difficult with a joint tenant mortgage since everyone must agree before things like renovation plans can move forward.
If you have weighed the pros and cons and believe that a joint mortgage is right for you, there are still a few things you should prepare for that come with owning a home with others. Ultimately, you’ll want to choose reliable co-owners you can trust to make this an enjoyable and prosperous experience for everyone involved.
When applying for a mortgage with others, you may be under the impression that one person’s optimal financial situation will balance out someone else’s who could use some work. However, a lender considers everyone’s financial details that will be going on the mortgage, and they may deny you based on one person’s credit score or debt load.
Something in writing could make all the difference if things go haywire while owning a property with others. A legal document that outlines the expectations of each co-owner can make all the difference in the long run. Perhaps it will include how expenses are divided, how much each share of the house the person owns, and what happens if someone doesn’t pay their share or wants out.
Living with friends or family can be as much fun as frustrating. It is vital to set out guidelines so that all co-owners know what is expected of them. This might include weekly or monthly chores or who is responsible for paying certain bills. Additionally, set out some guidelines on what to do in the event of conflict so you can mitigate any issues that might arise.
Learning the lingo needed to ensure you make the right decisions regarding your co-ownership mortgage can be challenging. That’s where I come in. I will take the time to explain the details and answer your questions in terms you can understand. Additionally, you’ll benefit from my ability to scan through dozens of lenders to find you and your co-owners a great rate. Contact me today to see how I can help you.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.
