Team­ing up to buy your home sweet home

Bor­row­ing op­tions these days al­low up to four peo­ple to hold the same mort­gage


He­len Bir­kett longed to get into the hous­ing mar­ket. But as a sin­gle woman, work­ing three dif­fer­ent gigs, she didn’t have the kind of steady 9 to 5 job that lenders want to see.

Then, one night, about 16 years ago, while out for a drink with a few friends, she was be­moan­ing the fact that she’d been re­jected yet again for a mort­gage. “We should go in to­gether on a prop­erty,” joked one of her friends. They all laughed, but Bir­kett couldn’t stop think­ing about what he’d said. Fi­nally, she called him. “Let’s do this,” she said. “Let’s go out and look at some prop­er­ties.” They went out shop­ping for a house that week­end, found a place they liked and bought it. “Ev­ery­thing was split 50-50,” she says. “And we had a le­gal agree­ment that spelled that out. I even drew up a will to say what should hap­pen to my por­tion of the prop­erty if I died.”

That was the first of two prop­er­ties that Bir­kett, now 42, has pur­chased with the same friend. They sold the first when they re­ceived an of­fer from a high­rise condo builder. They bought the lat­est just three years ago, pay­ing $550,000 for a house they ren­o­vated to­gether. They both had two floors, but Bir­kett turned one of hers into a base­ment apart­ment to help with the mort­gage. Now they’re look­ing to sell again — he may move to the coun­try and she is con­sid­er­ing her op­tions.

Ini­tially, many of Bir­kett’s friends ques­tioned her de­ci­sion to co-own with a friend. But the shared house is now worth $800,000 and with the pro­ceeds from the sale, Bir­kett should be able to buy a place of her own. “I don’t think I would have ever got into the mar­ket if I had waited,” she says.

Bill Whyte, se­nior vice-pres­i­dent and chief mem­ber ex­pe­ri­ence of­fi­cer for Merid­ian Credit Union, says Bir­kett isn’t the only one strug­gling to get a foothold on the prop­erty lad­der in a hous­ing mar­ket char­ac­ter­ized by soar­ing home prices. Buy­ers are strug­gling to get fi­nanc­ing, par­tic­u­larly with the fed­eral gov­ern­ment’s new stress test, which stip­u­lates they must qual­ify at the Bank of Canada in­ter­est rate.

“Even though our five-year fixed mort­gage is 2.69 per cent right now, you still have to qual­ify at 4.69 per cent,” Whyte says. “That is mak­ing the en­try into the hous­ing mar­ket dif­fi­cult for peo­ple, even if they’ve been sav­ing for years.”

Hence the ad­vent of new mort­gage op­tions al­low­ing friends or fam­ily to pool re­sources and buy to­gether.

In many ways, Merid­ian’s new Fam­ily + Friends Mort­gage, in­tro­duced in Fe­bru­ary, in time for the spring mort­gage sea­son, op­er­ates like just about any other mort­gage.

“There’s still a flex­i­ble re­pay­ment sched­ule and you can choose any kind of mort­gage you want — vari­able, two-year or five-year fixed,” Whyte says. “There are no ex­tra fees or in­creased in­ter­est rates and there’s noth­ing re­stric­tive in the mort­gage it­self.” The big dif­fer­ence? Up to four peo­ple can be on ti­tle.

They could be sib­lings, cousins or sim­ply friends that have known each other for a long time. And par­ents may sign on too, ei­ther to get their de­posit back if the kids sell, or to set up an up­stairs/down­stairs ar­range­ment with their adult chil­dren.

Sim­i­larly, Gen­worth Canada of­fers a ‘fam­ily plan pro­gram’ that al­lows peo­ple to help buy a home for im­me­di­ate fam­ily mem­bers who have good credit, but lack the in­come to meet stan­dard gross debt ser­vice ra­tios (GDSR) and/or to­tal debt ser­vice ra­tios (TDSR).

The pro­gram could work for a par­ent who wishes to help an adult en­tre­pre­neur­ial child buy a home or wants to pur­chase a house or condo for their univer­sity or col­lege-bound kid, Gen­worth’s web­site sug­gests. It could also en­able an adult child to buy a home for ag­ing par­ents on a fixed in­come. The ex­cep­tion: it can’t be used to buy in­vest­ment prop­er­ties that won’t be owner-oc­cu­pied.

In spite of the ob­vi­ous ad­van­tages of team­ing up to buy a mort­gage, it’s not a ven­ture to be un­der­taken lightly, warns Whyte. “You want to make sure you un­der­stand all the nu­ances,” he says. That means hav­ing a can­did talk about who cov­ers what ex­penses and what hap­pens if one party to the mort­gage wants out, or some­one can’t cover their share of the mort­gage pay­ment.

“Di­vorces hap­pen all the time,” he says. “And that’s messy enough. When you’ve got four peo­ple on the mort­gage, it can be a fair bit messier.”

There are ex­tra costs as­so­ci­ated with writ­ing up a legally bind­ing joint-own­er­ship agree­ment, Whyte says. But it could be money well spent. Merid­ian of­fers a book­let with sug­ges­tions and tips on its web­site, in­clud­ing what to cover in a le­gal agree­ment and what other mat­ters you should dis­cuss up-front.

A key thing to re­mem­ber is that, even if the mort­gage hold­ers own dif­fer­ent shares of the home, they are all equally li­able for the mort­gage, Whyte says.

“A house is gen­er­ally the big­gest pur­chase most of us make, whether it’s with some­one else or on our own,” he adds. “It’s some­thing you want to re­search and think about be­fore jump­ing right in.”

As for Bir­kett: she has no re­grets. “When you think about the num­ber of re­la­tion­ships that are fall­ing apart, what’s the dif­fer­ence if you buy with a friend or a hus­band?” she asks. “Ba­si­cally that joke over drinks turned into the best de­ci­sion I ever made.”


Be­fore pur­chas­ing a home with a friend be sure to have a can­did talk and write up an agree­ment out­lin­ing the what-ifs.

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