We’ve all been there. The dream of buying a home together trots merrily into your mind, only to be chased away by a swarm of what-ifs. While no one can (or even should) anticipate every possible contingency, we’ll use this post to dig into some of the co-buying questions we’ve heard most often.
Spoiler alert: a good legal agreement is almost always the answer.
Is it harder to get a mortgage when you co-buy?
Nope. In fact, buying with others often makes it easier to get a loan. You can choose to have everyone apply, or just one or two of you. Your mortgage broker will use your credit scores, incomes, and debt to determine what will get you the best loan. Additionally, if you’re worried banks will view you less favorably because you’re buying with a person (or people) you’re not married to, there are federal laws in the US and Canada that protect against that.
What if someone wants to sell?
The two most common co-ownership arrangements are joint tenancy and tenancy in common. When it comes to selling an ownership share, each has its own rules, which you should consider when deciding which arrangement is best for you. That said, in either case, your legal co-ownership agreement should outline the sale process to make sure it’s understood and agreed upon by everyone.
I’ve always been told friendships and money don’t mix. How can I protect my relationships?
A co-ownership agreement is vital here, too. Picture your co-buy as a classic, action-movie-style rope bridge. Assumptions and implicit understandings are iffy, unstable boards: you might make it across, but you also might fall 200 feet into a mess of crocodiles. Lay out a solid structure by openly addressing important issues beforehand. Then keep up the good work! Clear communication makes for great co-buys and relationships alike.
What if someone doesn’t pay their share of the mortgage?
You guessed it! This is also something you’ll outline in your co-ownership agreement. In fact, we recommend setting your minds at ease by agreeing to keep three months of advance mortgage payments in a joint account at all times. (Learn more about that and our other recommendations in our Agreement Builder, which is part of the Pairadime Product Suite.)
What if our relationship sours, but neither of us wants to leave?
This is a tricky one, but thankfully there are professionals trained for exactly this situation! If you can’t reach a compromise on your own, enlist the help of a dispute resolution specialist. An impartial third party will help you find the best solution.
What if we want to add another co-owner after the fact?
Not a problem. You can add a person to your home’s title and update your co-ownership agreement to include them. Things get more complicated if you want to add your new co-owner to your home’s mortgage, but it’s still doable. You’ll just need to refinance in most cases.
My partner and I aren’t married, but we want to buy a home. What happens if we break up?
While there are clear laws regarding the division of marital property, the same can’t be said of the property of unmarried partners. But that is, again, where your co-ownership agreement comes in. A signed legal contract is an excellent way to clear up murky areas. Check out our 5 Essential Tips for Buying a House Unmarried to learn more.
My parents are helping me with the down payment. Or, I’m helping my kid with their downpayment. Should we have a co-ownership agreement?
If the money is given as a gift with no stipulations, a co-ownership agreement is probably not necessary, though you will want to document the gift properly. However, in any situation where ownership is shared… you can probably see where this is going. A co-ownership agreement is essential for minimizing misunderstandings and laying out everyone’s expectations in a clear, direct way.
There are, of course, many more co-buying questions that can and will come up, which is why experienced, knowledgeable help is so valuable. But, while you can’t eliminate every risk when buying a home, you can navigate the process in a smart, responsible way.
And, congratulations! Getting overwhelmed by what-if questions is a sign you’re taking your co-ownership dreams seriously. Seeking out answers means you just might be ready to act on those dreams.