Co-owning a property

Sky-high real estate prices in big cities, combined with the new mortgage rules have made it increasingly difficult for first-time buyers to enter the property market. Co-signing a mortgage with a family member or friend is a very viable way to get around this hurdle. For many, it might also be the only way to enter the real estate market at all. Co-owning property has become quite the trend among the younger generation and those who struggle to get a foot on the property ladder. The fact that you can ask almost anyone to co-sign a mortgage with you, makes it a very attractive option. It does however come with its own set of risks, so make sure that it’s someone you trust.

The benefits of buying with a partner.

When qualifying you for a mortgage, lenders will always consider both your income and your downpayment. Qualifying for a mortgage on a single income can be tough. Saving up for a decent downpayment, while living in an expensive city such as Toronto or Vancouver is near impossible.

This is why co-ownership is an attractive choice. Since the financials of both partners are taken into consideration, it can significantly reduce the amount of money you personally have to put towards a downpayment. Other costs, such as the legal fees and inspection reports, are shared between the two co-applicants.

This lessens the financial burden for both parties. It also increases your buying power. You now have more options in terms of location, size etc. In other words, you can now afford that townhouse with the garden, instead of the small condo!

There are even lenders who have mortgages geared specifically towards co-ownership. Family and Friends Mortgage from Meridian is a credible option. If you don’t have a suitable co-applicant, there are services that can match you up with other potential homebuyers. It’s still advisable to meet with a financial advisor or mortgage broker. They will be able to assess your needs and find the best deal to suit your specific circumstances.

Finding a trustworthy partner, who have their finances in order, is the first step. Next, you’ll want to get your pre-approval from the bank. Your mortgage broker can issue you with a pre-qualification letter and help guide you through the application process. They also deal with the lenders on your behalf, making sure you get the best rate.

Once you’ve purchased the property, make sure you draw up a co-ownership agreement.

No matter the relationship, prospective co-owners should treat it as a business deal. Get a lawyer/solicitor to oversee the paperwork. Do your research about your co-applicant’s financial status, credit scores etc. You’re both equally accountable for the mortgage. If either of you defaults on a payment or pulls out of the deal, it could affect the other person’s credit score.

Be upfront and clear about your needs and expectations. This should ensure a long and happy partnership!