Co-ownership of homes is gaining popularity in Canada for various reasons. While some opt for shared ownership due to cultural traditions, caregiving responsibilities for elderly parents or young children, an increasing number of Canadians are turning to co-ownership as a solution to the housing affordability crisis.
In a 2023 survey conducted by Royal LePage, it was revealed that 6% of Canadians co-own their homes with individuals other than their spouses or significant others. Among these co-owners, a significant 76% cited affordability challenges as the primary motivation for their decision. Notably, among those aged 25 to 34, a staggering 83% pointed to affordability constraints as the driving force behind their choice.
Breaking down the demographics of co-ownership, 89% of co-owners share their property with a family member, 7% co-own with friends, and 8% engage in joint ownership with individuals who aren't friends or family. Approximately half of the respondents reported living in the co-owned property, while 28% do not cohabitate, and 6% indicated that the property is not their primary residence.
Owning a home has long been a hallmark of the Canadian dream. However, rising housing costs in recent years have made this dream seem increasingly out of reach for many. In response to these challenges, an innovative solution has been gaining popularity - co-ownership of a house. Whether you're a first-time buyer or looking for a more affordable way to enter the housing market, co-ownership offers a range of benefits that can help you achieve your homeownership goals. In this blog, we'll explore the advantages of co-owning a house.
1. Shared Financial Responsibility
One of the most significant advantages of co-ownership is the shared financial burden. When you co-own a house with someone, you split the mortgage payments, property taxes, insurance costs, and maintenance expenses. This can substantially reduce your monthly housing costs, making homeownership far more affordable than going it alone.
2. Easier Qualification
Co-ownership can make it easier to qualify for a mortgage. Lenders consider both co-owners' incomes and credit histories when evaluating your loan application. This can be especially beneficial for individuals who might not meet the financial requirements for a single-family home on their own. Co-ownership expands your purchasing power and enhances your chances of securing a mortgage.
3. Diverse Partnership Options
Co-ownership doesn't just mean sharing a home with a spouse or family member. You have the flexibility to choose your co-owner, whether it's a friend, a business partner, or someone you trust. This flexibility allows you to tailor the arrangement to your specific needs and preferences.
4. Reduced Maintenance and Upkeep
Maintaining a home can be a time-consuming and costly endeavor. When you co-own a house, you can share the responsibility for repairs, renovations, and landscaping. This not only lightens the workload but also spreads the financial commitment, making it more manageable for both co-owners.
5. Building Equity Together
Building equity in a home is a long-term investment strategy. When you co-own a house, you and your partner(s) contribute to the property's equity growth. As the home appreciates in value, you both benefit from the increase in equity. This can serve as a stepping stone to future homeownership or provide a source of financial security.
6. Enhanced Location Options
Co-ownership can open up more desirable location options that may have been out of reach on a single income. You and your co-owner(s) can pool resources to afford a home in a prime location, whether it's a vibrant city neighborhood, a waterfront property, or a coveted school district.
7. Reduced Risk
Shared ownership can also mitigate risk. If one co-owner faces financial difficulties or decides to move out, the other co-owner(s) can step in to cover the costs. This shared responsibility provides a safety net, reducing the risk of foreclosure or forced property sales.
8. Negotiating Power
When you co-own a house, you often have more negotiating power in real estate transactions. Sellers may view co-buyers as more serious and financially stable, potentially leading to better deals and terms.
9. Tax Benefits
Co-owners can enjoy certain tax benefits. For instance, you can deduct mortgage interest, property taxes, and other homeownership expenses on your tax return. Consult with a tax professional to fully understand the tax advantages available to you as a co-owner.
10. Long-lasting Relationships
Co-ownership requires clear communication and shared responsibilities. This can strengthen your relationship with your co-owner(s), whether they are family, friends, or business partners. The experience of jointly managing a home can create lasting bonds and valuable life lessons in cooperation and teamwork.
In a housing market marked by soaring prices and financial challenges, co-ownership of a house offers a compelling pathway to homeownership. It allows you to share the financial commitment, reduce costs, and enjoy the benefits of owning a home while building equity and strengthening your financial future. If you're considering homeownership but find it daunting on your own, explore the possibilities of co-ownership and unlock the doors to your dream home together.
In response to the growing demand for housing solutions, there has been a rise in companies specializing in co-ownership options. One such company is Toronto-based Ourboro, which invests up to $250,000 toward a buyer's down payment, in exchange for a share of the home's future value. This unique approach allows homeowners to live independently and handle mortgage payments on their own, enabling them to build equity and potentially secure better mortgage terms in the future. Lorne Andrews, principal broker at DLC Expert Financial, has recommended Ourboro to many clients, emphasizing its potential to help individuals enter the housing market sooner, especially those who can afford mortgage payments but lack a 20% down payment.
Ourboro mandates a minimum 5% down payment from buyers, with the company contributing the remainder to reach the 20% threshold. This arrangement often leads to longer mortgage amortization periods and cost savings on default-insurance fees. Andrews describes this as a stepping stone for homeowners: "Get into a home today, build equity, cash out, now go buy your home with the equity that you've built in this home over the first four or five years."
In a housing market plagued by reduced supply, surging prices, stricter mortgage qualification criteria, and the highest borrowing rates in decades, co-ownership is increasingly viewed as a viable solution. Karen Yolevski, COO at Royal LePage, explains, "In a market beset by reduced home supply, escalating prices, tightened mortgage qualification requirements, and the highest borrowing rates in more than two decades, many buyers are having difficulties securing the property that they want. By dividing the cost of a home between more people, Canadians can not only get their foot on the property ladder more easily, but also expand their home search to more desirable locations or larger properties that may not have been accessible with their budget alone."
Information From Canadian Mortgage Trends