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Five steps to a conflict-free shared mortgage

With no signs of the real estate market softening, a growing crop of first-time homebuyers are pooling their resources to purchase property together. The perks of this unconventional arrangement range from shared childcare to greater financial security.

Equally as varied are today’s co-ownership candidates. Millennials, Baby Boomers, multi-generational families – they are all joining forces to boost their buying power. In fact, a third of Canadians would consider co-buying a home, according to a recent ReMax survey.

“There’s a lot more interest [in co-ownership agreements],” says Vicki Borenstein, a Toronto real estate broker. “Who can afford a house by themselves anymore?”

But while co-ownership promises huge rewards, it can also be risky. What happens if one of the co-owners wants to sell? Who should foot the bill for renovations? How can dwellers divide household chores?

Here are 5 steps to avoid conflict and make the most of your shared mortgage:

1. Split property fair and square

Even dream homes can produce nightmares if co-owners can’t agree on how to divvy up the space – and expenses.

“Why would the person who gets the basement apartment pay the same proportion of mortgage as the person on the main floor with the fireplace?” says Borenstein. “This is one of the biggest areas of confusion when people get into co-ownership.”

Instead, by hammering out these details from the get-go, co-owners can set the tone for successful co-habitation. 

2. Set up a joint bank account

Simplify your finances by opening a joint account for all members on the mortgage title. Next, set up the account so that monthly mortgage payments are drawn automatically.

A savings account can also come in handy in the event of an emergency. By agreeing to contribute a set monthly amount to a savings account, home dwellers can ensure they’re financially fit to weather a leaky roof or burst pipe.

3. Seek out legal assistance

According to Lesli Gaynor, a Toronto real estate agent, one of the most common mistakes people make when purchasing a home together is that “they don’t have a good legal agreement. They trust their friendships.”  Gaynor would know. In addition to launching GoCoSolutions, an agency specializing in co-ownership, Gaynor bought her first house with a friend when she was 25-years-old. “The only way we could have gotten into the market was by purchasing a home together,” she says. “But we didn’t have a great legal agreement.”
A lawyer can draft a legally binding joint ownership agreement that covers variables, including:

  • percentage of equity each owner holds

  • how property will be used, by whom, when

  • how to divide up expenses (repairs, renovations, utilities, insurance)

  • exit strategies

  • right of refusal for selling

But not any lawyer will do. “People want to use lawyers that they’ve known all their lives like their buddy down the street,” says Borenstein. “But you need to use a lawyer who’s familiar with co-ops and co-ownerships.”
Although Borenstein says legal fees for a co-ownership agreement can run as high as $30,000, it’s worth every penny. “You must do this right if you’re going to do it,” she warns.

4. Manage the books - objectively

The longer you own a home, the more likely it is you’ll encounter additional expenses. Yet in the case of a co-ownership arrangement, determining who should pay for a new porch, or what to pay for added storage space, are decisions best left to a third party. “Neutrality is always important,” says Gaynor.

Fortunately, a bookkeeper can keep track of household expenses, and assign fiduciary responsibilities, based on an objective assessment of the circumstances.

5. Keep communicating

A new baby, a significant other, a job promotion – they’re all life events that can significantly impact how – and where – you want to live. For this reason, it’s critical that homebuyers meet monthly to revisit the ways they want to continue to use the property.
Pooling resources to purchase a home can be a risky endeavour. But with the right mortgage – and some mutual respect, co-ownership is a prime opportunity to live out your homeownership dreams.

To find out how you can join forces to afford a home, visit Meridian.