- First Time Buyer Series: Part 1 – Easing the Cost of homeownership
Even with today’s very affordable mortgage rates, the real estate market can still present a challenge to many people wanting to step onto the property ladder. First-time buyers in particular are finding they have to make adjustments as they plan for their dream of home-ownership. Some young people are staying at home longer in order to save for a down payment. Other would-be homebuyers are scaling down their expectations, while still others are choosing a home with a rental unit to help with mortgage payments.
There are some other creative alternatives available to help First Time Buyers start to build some equity in the real estate market that entail multiple ownership of the same property…
Joint Ownership: Duplex
One option that may be of interest to family groups or close friends is the joint purchase of a multiple-unit dwelling, such as a duplex. Such a property might be jointly purchased by two groups of buyers, with each family occupying one of the property’s units.
The duplex approach can work well in situations where young people plan to marry, leaving their parents as “empty nesters”. In this scenario, the family home is sold, with the parents buying one unit of a new duplex outright, and then banking their surplus funds, perhaps for retirement. The younger generation then assumes the more manageable mortgage payments on the remaining half of the property. In this way, they can start to build equity immediately, without having to come up with a large down payment, or taking on a big mortgage.
Joint Ownership: Single Family Residence
In less formal arrangements, two couples may elect to jointly buy one single-family residence and share all the living space. This can sometimes be a stressful situation, and the best chance for success is usually when there is a family relationship between the two couples, such as two siblings with their spouses, where there is already some history of living together in a shared space.
Whatever method you choose to ease the cost of homeownership, the most important thing to remember is to get the all the details worked out before you buy. Everyone involved in the purchase should agree on all sub-lease and re-sale provisions “up front”, and in writing. For example, can one party move out and sublet their living space to someone else? Also, what happens when someone wants to sell? Does one party have the right to buy out the other’s interest? If so, how will a fair price be determined? And how long will the other party have to come up with the funds? Or, is the property simply put on the market with all parties sharing the proceeds?
In addition to the terms of ownership, the ongoing care of the property should also be considered. Who will be responsible for the ongoing maintenance of the property? What services such as landscaping or snow removal will be contracted out to service providers, and how will this cost be shared? How will the cost of major repairs be handled?
As you can see there are a lot of variables to consider. Such important issues should not be left to chance. Don’t expect that they’ll be sorted out easily when the time comes. The best course of action is to get a lawyer involved and draw up an agreement that clearly sets out the rights and obligations of all co-owners.
Remember, when you’re thinking of creative ways to ease the cost of owning a home, talk it over first with the expert. Tell your real estate salesperson all about your plans, so they can ensure that you are shown homes that conform to the appropriate zoning and municipal by-laws. Best of all, your Coldwell Banker real estate salesperson may be able to suggest options that you’d never considered, and help you make your home ownership dream a reality.