As housing affordability continues to be a challenge for many Canadians, aspiring homeowners are looking for creative ways to break into the real estate market. Some are relying on generous down payments from their parents, while others are hustling at multiple jobs to boost their savings. Other buyers are exploring joint ownership, which allows all parties to share the up-front and ongoing costs associated with owning a house, as well as the benefits.
But co-owning a home isn’t merely a living arrangement – it’s a legal relationship. Whether with friends, family or a partner, there are important factors to consider beyond the obvious, like who gets what room and who is responsible for putting out the garbage. How you own a home together also determines how you can get financing, what your rights and responsibilities are, how and to whom you can each sell or leave your share of the property to, and more. There’s a lot to consider.
If you are exploring co-ownership, here are some tips to get you started:
Create an agreement
Purchasing a home should be treated like a business deal with a formalized agreement that outlines the ownership structure and decision-making process, use of property, financial and insurance arrangement, and home operation and upkeep. To protect all parties, the agreement should also cover co-owner negligence or misconduct, dispute resolution and exit/entry provisions should a co-owner leave the arrangement. A lawyer can advise on the legalities of how to buy a house as a co-owner and ensure that appropriate legal recourse is in place.
Determine a budget
All buyers should have a pre-determined budget before buying a home, but for co-owners, financial transparency is essential. Co-owners need to decide the type of house they want to purchase and how much they can afford. There are also additional costs to keep in mind, such as:
- Down payment
- Mortgage payment
- Renovation costs
- Ongoing operation and upkeep (maintenance, property insurance, utilities, property taxes, etc.)
- Real estate fees (legal and realtor fees, land transfer tax, etc.)
Research mortgage options
If a mortgage is required, co-owners will need to work together with a financial institution to get pre-approved or to obtain one. It is also important to note that co-owners will have to share information on income, assets, debt and credit history with one another and not just the financial institution.
Get professional help
Along with obtaining legal advice from a lawyer, it is recommended that aspiring co-owners employ the professional services of a real estate professional. A realtor has the knowledge and experience to guide co-owners through the buying process and act as an unbiased party to ensure that all co-owners have their wants and needs heard. Before buying a house, hire a home inspector to verify that the house is in good condition. If there are plans to convert a home into separate units, make sure that the units are legal and comply with zoning, building and any other applicable requirements. Co-owners are also required to have sufficient property insurance to protect themselves and to meet mortgage financing requirements.
Final thoughts
Getting into the housing market via a co-ownership agreement is a great way to build equity and ease the financial burden of owning a home on your own. This type of agreement does require mutual respect and transparency, as well as trust, but it’s a great way to become a homeowner a lot sooner than if you were on your own.
If you need advice regarding co-owning a home, please contact Deborah Clerk, Real Estate Sales Representative and ASA at Keller Williams Realty Solutions, Brokerage, in Mississauga, Ontario, to discuss.
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