December: Family and Friends Mortgage

Sharon Francisco

What is the rationale behind the growing trend of people buying real estate with family and friends?  We often see in markets where the rental sectors are very tight that people share their units with a housemate or even a roommate to split the costs of accommodation.

With home prices not getting any lower these days, and with would-be borrowers faced with tougher mortgage rules, it has been difficult for first-time buyers to find a way to own real estate.

And instead of continually being renters, buyers are considering co-ownership now more than ever.  And owning real estate does not always have to be with a spouse, common-law partner or a romantic partner.  Another form of co-ownership is buying with a family member or a friend.

In these types of transactions, it would be beneficial to deal with people you trust as you will be equally liable and responsible for the totality of the purchase and ownership.  Both names will be on the title as well as the mortgage.

As both of you will have the ownership of the home as an asset, both of you will also have the mortgage as a liability.  This is why it is beneficial for these co-owners to consider this a business agreement more than just a living arrangement.

And just because this may be the perfect way to start being homeowners, this arrangement is not always permanent.  You may want a lawyer to draft a contract so that whenever anyone of you would want to sell or get out of this arrangement, there is an agreement in place to carry out.  This understanding of co-ownership will protect the relationship in times when the partnership needs to be dissolved.

Buying a home with a partner is very advantageous in a lot of ways.  Foremost is mortgage qualification and approval would be easier.  Considering that there will be two or more incomes to be used to show affordability of payment for the mortgage, the debt servicing ratios would not be too tight.

Also, the downpayment will be a combination of savings from the partners.  With the house prices going up, it is a big task to save up for downpayment.  In many cases, buying with a partner affords you a better type of real estate than you would otherwise be approved for.

Instead of buying a small condo, you may be able to afford a townhouse or a semi-detached home or even a detached home, which gives you more space or flexibilities.

If you are seriously considering this type of arrangement, first step is to find another person who would be willing to purchase a home with you.  Then together you would want to be pre-approved for a mortgage and once you have a budget, you can start looking for a property that would answer both of your needs, wants and capabilities.

This would make a happy living environment as well as a good business partnership for you.

Are you ready to purchase with a partner? 

Do you know of people who may benefit from this solution?  Let us give them the chance to start being homeowners.

(❚ Sharon Francisco is an Accredited Mortgage Professional at Verico One Link Mortgage & Financial, as well as a Certified Reverse Mortgage Specialist, committed to helping our readers find options to achieve financial goals.  For a free, no obligation consultation to discuss your mortgage options, please call 204-930-7708 or email at sharonf@onelinkmortgage.com.)