Co-share a Mortgage to Buy a New Home

Mingles mortgage, what’s that? It could be for you if the high cost of homeownership is getting you down. 

Finding a Home in the GTA

Housing prices in major Canadian cities are sky high. Getting a 20% downpayment together, let alone buying, seems almost impossible. Let’s see — $1.4 million for a brand new, three-bed brick duplex in Mississauga is only $5,375 a month. After the $280,000 down payment.  

Small House, Big Price

Then there’s the one-bedroom bungalow with the funky 50s vibe on the 25-foot lot in Rockcliffe-Smyth, where you’d prefer to live, for $665,000. Not sure how you, your spouse and his 75-year-old mother who only speaks Portugese are going to fit into the cramped quarters. Maybe you could put her in the unfinished basement (if she can get down the stairs).

Share a Joint Mortgage

By now, it’s looking pretty desperate. It’s time you moved your search over to a mortgage broker who can find you a joint mortgage or mingles mortgage for shared property. You can buy more house by pooling your resources with friends, roomies, siblings or your Portguese mother-in-law. You co-share the PIT (property, interest and taxes) and everyone gets a comfortable place to live. 

Five Per Cent Down, No Collateral 

When Humber College grad Tommy, 23, went condo shopping in Toronto, he was planning on a low-ratio, CMHC mortgage. Five per cent down didn’t go anywhere in The Beaches. where he had a line cook job at a brew pub. East Danforth was 10 minutes by car, but he still needed $700,000 for anything decent. His 2014 Honda Civic and maxed out Mastercard wouldn’t get him far with a conventional lender.

Next: Find a Condo in Old Toronto

Tommy’s East Danforth realtor knew he’d never get approved for a low-ratio mortgage with the $30,000 down payment his parents loaned him. Tommy’s brother Bill, on the other hand, was a “grease monkey” for Mr. Lube. He’d been doing oil changes for the past three years and had $15,000 from an insurance settlement. Tommy’s realtor could get the guys a nice two-bedroom walkup with parking for $45,000 down. The brothers could flip it for a profit or Tommy could buy Bill out once he made more money.

Buy a Bigger House for Less 

Co-housing gets you more home with a lower down payment. Getting approved for a mortgage can be easier and you might qualify for a higher loan amount. When you apply for a home loan together, your name is on the title along with all the mortgage holders. Your combined income qualifies for lower interest rates and your credit score goes up as you make the monthly mortgage payments. Better yet, combining your down payments to qualify for a conventional mortgage avoids the high cost of mortgage default insurance for a CMHC mortgage.


Mingle Your Mortgage

Unlike a shared joint mortgage, mingles mortgages allow you to buy a home together but have an individual mortgage. Upside: You share the legal fees, property transfer tax, mortgage appraisal and home inspection costs. You decide how much equity you can afford and what percentage of the property you want to own. Downside: when or if you sell, your realtor has to find someone who wants to share a house or condo with your friend or partner. 

Draft a Legal Co-housing Agreement 

Co-living has its risks. Having a legal co-housing agreement prevents misunderstandings about how to split utility and maintenance costs and who does the housekeeping. More importantly, you can decide what to do if:

  • you lose your job and can’t pay the mortgage
  • you get hit with a special levy
  • a high wind tears up the shingles
  • your partner forgets a pot on the stove
  • property taxes skyrocket
  • you fight over the housekeeping
  • you can’t stand living together.

A valid co-housing agreement drafted by a lawyer, signed and witnessed by all of you, protects your legal rights in case of disputes you can’t resolve. 

Selling a Shared Mortgage

Saying “we’ll just sell if it doesn’t work out” sounds easy. But breaking a shared mortgage can be tricky. Naturally, your priority is to protect your credit score and get back your equity. Your co-housing partners could refinance the mortgage and buy you out. They might agree to list, sell your home and share the profits (or losses). It’s all good.

Bad Timing, Big Trouble

What if you want out just as the real estate market drops? Be prepared to go to court if your partners disagree on timing or fall behind on their mortgage payments. It’s sort of like sharing a dorm, just more complicated. Agreeing on how to divide property after a breakup is why a binding, enforceable co-housing agreement is so important. 

Ontario Flat Fee Real Estate Lawyers 

Get legal advice before you agree to a joint mortgage. Axess Law Ontario real estate lawyers draft a co-housing agreement by video call or in person 7 days a week, at your convenience. Call toll free to 1-877-552-9377 or 647-479-0118 in Toronto or use our online booking form. In person appointments are available in Toronto, Scarborough, Vaughan, Etobicoke, Ottawa, Mississauga Winston Churchill or Mississauga Heartland. Video call and e-sign from any location in Ontario. Ask us how.
Click here to learn more about Axess Law’s real estate law services.

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