Joint home ownership: What you need to know.

Co-ownership or joint ownership, isn’t a new idea. But with housing prices on the rise, joint home ownership is proving to be an affordable option for many new home buyers and families.

There are many reasons to consider jointly owning a home. Beyond affordability, people can enter a joint housing agreement to maintain a certain lifestyle; not to live alone, or hope that by combining resources they can live a little more ‘upscale’.

Sharing the financial load (the deposit, mortgage payments, monthly expenses and fees) can be a huge help. And while sharing the financial responsibility, joint ownership helps build home equity.

While there are many pros to sharing a home-purchase it does require sober second thought and asking good questions.

As an experienced real estate agent, the best piece of advice I can provide is to hire an experienced lawyer that will draw up a cohabitation agreement. Think of it as a pre-nuptial agreement where both parties are protected.

Co-ownership agreements can be as loose or as detailed as the owners need, covering contingency plans such as one owner getting sick to what happens if there is an unexpected flood. A detailed agreement can layout the decision-making process for resolving maintenance disputes to guidelines on potential irritants like noise, parties, guests, cleanliness and of course pets.

A well written cohabitation agreement will cover the following critical areas:

• Type of ownership such as Tenants-in Common. Whatever the choice, all owners need to be listed on the Title.
• Expenses – On-going (hydro, water, insurance) and unexpected (general and major home repairs) expenses should be itemized. It should also clarify the amounts paid by either party for the down payment and who pays what portion of the mortgage, real estate taxes and home repairs.
• An exit plan. What if one owner passes away, is relocated to a new city, gets married, or is ready to fly solo? Will the other joint-owner now become the sole owner, or do they need to buy out the heirs? A lawyer may also recommend purchasing life insurance on each joint owner as a way to pay off the mortgage in case of death.

All this requires some serious and transparent discussion between all parties and the sharing of intimate financial information. And I would recommend hammering that out before looking for a new home or finding a lawyer. It always pays to do your homework.

Since obtaining a mortgage is key to purchasing a home, looking for a independent mortgage agent might be advantageous.

Here are some items to discuss and how they can impact your agreement:

• The mortgage rate could be tied to both credit reports. One person’s bad credit rating could negatively affect the mortgage terms or even the interest rate on the loan.
• Since both parties are listed on the mortgage, that makes both responsible for making payments – on time in full each month. If one party falls behind, you could both be reported to a credit agency for non-payment.
• Even with an equal split on the monthly mortgage payment, a lender sees it differently as if entire mortgage payment each month is yours alone. This can increase the debt-to-income ratio higher and make it difficult for qualifying for other loans.
• Exit planning on a mortgage doesn’t hurt. If one party wants out of the deal, removing names from the mortgage, requires selling the home or refinancing the loan under a single name.

There are many wonderful joint ownership success stories. And it pays to be realistic as to how long you want to share jointly. Situations change. So consider giving your agreement a tentative ‘renewal date’ – to allow each owner flexibility to do something else or re-new the current situation.

Home ownership without carrying the sole burden of all the costs can prove a huge boon. As your realtor, we’re here to help you navigate all of the options of home ownership.

If joint-ownership is on your horizon, contact us today and let’s get started!

Our team of real estate sales professionals is committed to finding you, your dream home. Whether you’re looking to buy or sell, the Karen Paul team is here to help with any questions.

Credit to posts by Investopedia & Money Crashers.