Today’s sky-high housing prices in many areas mean that young people and families are being priced out of home ownership. With record-high rents and limited affordable housing options in some cities, a new trend that is growing in popularity is that of buying a home with other people such as friends, family and coworkers. This shared ownership can be a positive move, especially when it helps you reach the financial goal of buying a home, as well as to relieve some living costs and hopefully enjoy the company of your housemates in a pleasantly shared space. However, there are also a few negatives inherent with this type of arrangement. Let’s take a closer look at 4 key considerations you should make before purchasing a home with other people:
1. Getting started
If you’ve found a few friends, relatives or co-workers who are also eager to explore joint home ownership, it’s essential to make sure you’re compatible before you commit to anything. Are there any personal deal-breakers for you such as pets, home businesses, parking availability, smoking or late-night parties for example that would impact you? Make sure you’ve seen how your future housemates live currently to get a good idea about what shared home ownership with them would look like.
2. The financials
Saving for a down payment, applying for a mortgage, purchasing a home and looking after its upkeep and bills is complicated enough for single people or couples…let alone adding in a few extra people. Unlike the college or university days when you shared the rent with a few friends, home ownership is a deeper financial and personal commitment; you can’t just give 60 days’ notice and be free and clear.
Everyone will need to be on the mortgage application, which means you need to share information around your income, savings, debts, credit scores and so on. Some might get approved while others may not, or some may have more saved towards a down payment than others. In these cases, you need to decide if certain people will have more of a percentage split of the ownership than others. Additionally, if you are applying for government incentives for first-time home buyers, all ‘owners’ need to meet the eligibility criteria in order to be approved. Further, you’ll need to decide how all the various bills will be paid and how that will be divided. Another scenario to consider is if one person gets the master bedroom with a private bathroom for example, while another gets the tiny basement bedroom with the drafty window; do they both pay equally towards the mortgage and bills? These are important considerations to review with all parties involved before moving ahead with your home purchase. The fairer and more just the arrangements are for everyone, the more likelihood of success.
3. Household upkeep
Owning a home involves regular upkeep and chores, which some people are more committed to than others. It’s important to set clear expectations and settle on a plan of action regarding those household tasks long before you jump into shared ownership. Doing so not only helps protect your investment and keeps it feeling comfortable and looking nice, it also helps avoid future arguments and tension down the road.
4. Make it legal
Even if you’re planning your move with your very best friends and have high hopes for a successful venture as home owners, there are a lot of unexpected events that can happen to turn your dreams into a nightmare. While your names will be on the title or the deed, there’s more that you can do to cover your bases. That’s why it’s important to get a legal agreement drafted, as there are additional risks involved with shared ownership or joint tenancy of this kind. For example, you need to work out alternate financial arrangements if someone defaults on their share of the mortgage, damages the property, invites someone else to move in, wants to make significant changes to the home, or if they become ill or pass away unexpectedly. A lawyer can help you draft up an agreement or contract that helps keep you legally protected if things go awry.
As you can see, there’s a lot to buying a home with people other than a spouse or close relative. While it can be a positive financial and social opportunity, it can also involve more complications or hardships than you bargained for. If you’d like to find out more about buying a home or want to discuss your mortgage options, talk to me, Darren Robinson. Together we can look at your financial goals and come up with a plan that works for you. Connect with me today at 705-230-1306 and let’s get started: I look forward to helping you reach your financial goals big and small!