Co-ownership—co-operation is key

The buddy system

Maybe you’re someone in their 20s wanting to get on the property ladder or perhaps an empty nester looking to share expenses in retirement. There are plenty of reasons for exploring co-ownership with a friend, but it’s important to go into it well informed. So, let’s get started!

Benefits abound!

In addition to having company, sharing chores and splitting expenses—like your home insurance policy—co-owning a property with a friend comes with other important benefits.

The best advantage by far is being able to pool your resources for a more substantial down payment, which is often the biggest hurdle people face when buying a home.

You’ll also be able to wield boosted purchasing power because you’re combining two incomes. Sometimes one person’s salary isn’t sufficient to secure a large enough loan.

And buying a home with a friend affords you the opportunity to start building equity sooner rather than later.

Begin with open, honest discussions

Be sure to choose someone reliable and trustworthy, and with whom you can discuss each other’s:

• income
• credit card debt
• loan balances

When it comes to co-ownership, credit scores will be blended. So, if one person has a low credit score, it might be better if the person with the higher credit score is alone on the property title. If that’s the case, then co-ownership can be stipulated in a separate legal agreement.

The co-ownership agreement

This agreement is a legal document typically prepared by a real estate lawyer regarding everything related to the shared ownership of a property. It covers a variety of provisions, including:

• each person’s percentage of ownership interest in the property
• each person’s percentage of mortgage payment responsibilities
• each person’s share of maintenance and repair costs
• and much more

Insofar as possible, try to anticipate unexpected circumstances so that they can be addressed in the co-ownership agreement. There’s a lot to discuss—from job loss and job transfer to the type of home insurance that’ll suit your needs and lifestyle.

Determine the type of ownership

There are typically two ways you can co-own a house when you buy with a friend—as joint tenants (similar to a married couple buying a home together) or as tenants-in-common (in this case a tenant is a co-owner). The ownership type is another important point to agree on. Here’s the difference:

• Joint tenancy means that each co-owner has an equal share in the property and if one co-owner passes away, their share automatically goes to the other co-owner
• Tenancy in common means that each co-owner has a specified share in the property, which can be based on their financial contributions, that becomes part of their estate when they die.

No matter the type of ownership you choose, all owners on the property title will need to sign the mortgage with one sole lender.

The bottom line

There are so many benefits to buying a property with a friend, among which include being able to afford a bigger down payment, having greater purchasing power, being able to build equity and sharing expenses. And having the right experts in your corner for the agreement, mortgage, and of course, home insurance, will help make the process a breeze.

Remember to do your homework, and happy house hunting!