Finance - Buying A Condo With A Group Of Friends

With real estate prices hitting record highs, many first time homebuyers might be wondering how they’re going to get their foot into the market.For some solo ownership is simply out of reach. To mitigate costs of their first home many are now looking to co-purchase properties they would be unable to afford on their own. In this case, up to four people buy a property together and split all the costs.Trendy way to borrowCo-mortgages are nothing new but have become more popular lately. Some financial institutions are now launching products that are specifically aimed at this group of people eager to find a way to buy their first home. With condo prices up in major cities across the country, this could be a viable option for many first time homebuyers. But, before you start hunting for that perfect place to buy with your buddies, there are many factors to consider in a co-mortgage situation.Seek legal advice Many of us only talk to a real estate lawyer once we have found the house we want and put in the offer. Real estate lawyer Ray Leclair is with LAWPRO, and he says anyone thinking of buying a house should seek legal counsel first, and this is especially true in the case of a co-mortgage. Leclair says in a co-mortgage homebuyer’s should “plan for the divorce because you’re getting into a business arrangement together and there is a certainty that it will end.” Leclair says it should be clear how long each owner intends to own the house and how the sale of the house would work.Everyday bills Similar to when you rent, some are going to have a better bedroom or an ensuite bathroom. Some of the owners might have a car and need access to the driveway while others take their bike or walk. These little things should be worked out before you buy. Who gets what is important to establish. As you can imagine, breaking up a co-owner of the home over something trivial like parking will not be that easy. Real estate lawyer Leclair says there should be a comprehensive maintenance agreement between the two parties that would detail how unexpected expenses will be dealt with. He also recommends setting up an emergency fund that both parties contribute to equally.Ability to borrow moreSomething to consider. If you plan to keep this home as an investment and later borrow more for a second home, beware that your credit worthiness will be based on the entire mortgage. In a co-mortgage situation all borrowers are 100 per cent liable for the mortgage, regardless of how much equity stake they have. This can mean the bank offers you a smaller second mortgage then you expected.Plan for the worstIn a co-borrowers agreement the home title would most likely be tenants in common, rather than the more common joint tenancy. With tenants in common if one owner was to die the share of their home would become part of their estate. Each owner should have a will drawn up that clearly states what would happen in the event they were no longer there. It should detail who would be managing that estate and who would inherit their share of the property. These details should be shared with the other co-owners so they know what to expect. Make sure your real estate lawyer explains how the ownership agreement will work.Buying a home is a big financial commitment. Make sure the people you are buying with realize this and are taking the purchase seriously. Also choose co-borrowers who share your financial values; this will help make your experience buying with friends a bigger success.Rubina Ahmed-Haq is a journalist and personal finance expert. She is the Finance Editor for Home Publishing Group. Her columns appear in Condo Life and Active Life. Rubina regularly appears on CBC Radio, CBC News Network, CTV Your Morning and Global Toronto. She writes for ratesupermarket.ca, debt.ca and has her own website www.alwayssavemoney.com. She is an alumna of the Humber College post graduate journalism program and holds the CSC designation. Follow her on Twitter @alwayssavemoney.