Affordability is the word that’s heard whenever real estate is mentioned in conversation, it seems. A housing market with higher prices driven by a lack of inventory has led younger Canadians to become creative in trying to find their way into a market that continues to become more expensive for first-time buyers.
• Everybody involved in the mortgage would have to qualify for their share, or one person would have to qualify for the entire mortgage.
In search of alternatives to the conventional mortgage, many are pooling their resources and sharing not just accommodations or properties, but also mortgages. It’s not entirely new as financing concepts go, but “group financing” appears to be a growing fiscal necessity, with 13 per cent of Canadians surveyed recently saying they are serious about using it as a mortgage option.
The concept started to take off with multi-generational families. In 2016, the Canadian Federal Census data showed that homes with three generations or more formed the fastest-growing category since the 21st century began.
It does need to be done with caution. Mortgages are often complicated and having multiple borrowers isn’t likely to simply things.
According to a story in The Financial Post, there’s a number of considerations in co-mortgaging with a group of friends:
• Everybody involved in the mortgage would have to qualify for their share, or one person would have to qualify for the entire mortgage.• A lawyer might be required to draw up a contract stipulating who owns what percentage of the home, and how all parties will contribute.
• A contingency plan would give the borrowers a back-up plan to prepare for a possible life-changing event, and make the lender more confident about working with a group of borrowers.
• More borrowers, more paperwork, more work for the lender.
• With multiple borrowers, there’s a greater chance of a “life-changing event” that could impact on the ability of the others to pay the mortgage.
That’s not to say sharing a home and a mortgage with friends is a risky idea, as long as the potential risks are addressed before signing the papers.