Co-Purchasing: The Mortgage Alternative

Posted by Gurpreet Ghatehora on Tuesday, January 5th, 2016 at 6:29pm.

As rental rates in Edmonton seem to only be soaring, making that initial down payment a near-impossible option for many, one alternative is becoming a more commonplace practice in the Edmonton real estate market: co-purchasing.

Co-purchasing, or buying a home with more than one person (who isn’t a partner or spouse), is one possible way for people to get into the housing market who may not be able to afford an entire place on their own. The concept is simple: find some friends or business partners, find a house that either has suites or can be renovated to have separate suites, get a lawyer to draft up an agreement that makes everyone happy, and settle into your new home. It can be an effective way to get into the market early, and it can even lead to having multiple properties in your portfolio before others who waited and waited to get that sizeable down payment.

Of course, such advantages do come with certain drawbacks, first of which is the agreements itself. With many co-purchasing agreements, people assume their previous friendship is all they need to work everything in the future, which is unfortunately not the case. Clear, legal partnerships are the best route for preserving both the investment and relationships, especially since someone may want out for their own reasons. In these future instances, it’s best to have a lawyer draft up an agreement that everyone can live with. A joint bank account to handle taxes, mortgage payments and home maintenance must also be set up.

Another potential drawback is living arrangements. While some are content sharing a house with three or more roommates, others will find it more preferable to renovate the property into separate units. If this is the case, the costs of renovation needs to be considered before an agreement can be reached. Also, the proposed renovations all have to fall within city and neighbourhood guidelines.

There are concrete benefits to co-purchasing, but they can be offset by poor planning and rushed decision-making. If you want to get into the housing market a little earlier, it could be your best bet. Just be sure to get everyone you need to make up an agreement that benefits all parties, and communicate clearly throughout your time together

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