While dreaming of pooling your savings together with a group of your closest friends or relatives to purchase a home together might initially seem like a far-off fantasy, co-owning a house is a very real homebuying tactic.
As house prices in Ontario — and specifically our Toronto market — continue to rise exponentially year over year, many eager real estate investors have been searching for alternative ways to enter our highly competitive market.
So, if you’ve been looking to get a foothold in today’s real estate market but don’t necessarily want to go all-in on your own, our guide to co-owning a house below will help you determine if co-ownership is right for you.
What Is Co-ownership?
Just like the name suggests, co-ownership is a real estate buying practice where multiple parties come together to fund the purchase of a property. While this is common practice in the real estate world (think: spouses or partners), co-ownership between family members or close friends is somewhat less common.
Why? Co-owning a house with someone who isn’t your committed long-term life partner requires a high level of trust and faith between parties, as well as a good bit of long-term planning.
However, saving up for a home on your own can take even more dedication, commitment, and time than finding the right partner — especially if you’ve thoroughly investigated the idea before.
As many buyers are keen to enter the real estate market, co-owning a house allows for those who want to invest in property the opportunity to do so much quicker and easier than they might have on their own.
About Joint Mortgages
Just like any other real estate purchase, co-owning a house will still require a formal mortgage plan. However, instead of taking out a mortgage in one person’s name, there are two or more signed on the dotted line.
This is what’s called a joint mortgage, and is most commonly used when couples or partners decide to co-fund a purchase together. However, joint mortgages don’t discriminate based on your relationship to your co-ownership partners, thus opening the door for friends and relatives to undertake the joint mortgage responsibilities together.
One potential drawback of joint mortgages is that both applicants’ financial backgrounds and standings are jointly analyzed by the mortgage lender. So, if your co-ownership partner has a less-than-desirable debt history or credit score, your interest in the joint mortgage will be negatively affected.
No matter which way you look at it, there are many perks to co-owning a house with family or friends.
Not only do joint mortgages open the window for real estate investment much quicker than an individual mortgage, but they aren’t overly difficult to set up. In fact, qualification can often be easier when there are multiple incomes funding the mortgage.
Additionally, the month-to-month operating costs as well as larger home maintenance costs of a co-owned house can be split up between the purchasing parties (if they both live in the home at the same time).
While it’s easy to get wrapped up in the excitement of co-owning a house after reviewing the pros of the procedure, the purchasing tactic does come with its own unique set of cons too.
Joint mortgages require a long-standing financial obligation between the buying parties, which can put a financial and social strain on the buyers’ relationships. While fixed-rate mortgages have up-sides like lower interest rates, the financial penalties for breaking the mortgage agreement can be very high.
Do you want to learn more about co-owning a house in Toronto? Our best advice is to ask a member of our experienced team directly about how we can help you achieve your dreams of homeownership today. To get in touch, simply contact us here.