How to buy in a time of escalating prices
Affordability is a hot topic today when it comes to new home real estate, including condominiums. Yes, prices are prohibitive for many prospective buyers. The thing is, however, that people are purchasing with enthusiasm, as they recognize what a great lifestyle and financial investment a condo in Toronto or the GTA is these days.
How can they afford it? The down payment is often the deterrent to buying, but perhaps the bank of mom and dad can help with that. Sometimes, parents of grown children purchase a condo suite for their offspring to live in temporarily while in college or university, then hand over ownership once the young people finish their post-secondary education, are employed and can afford to keep up mortgage payments.
Then again, some buyers are harnessing out-of-the-box thinking when it comes to affordability. For example, co-ownership has become an alternative for many. Co-ownership involves non-related (often) people or relatives sharing ownership of a home. Although it is not an entirely new concept, it is gaining such popularity that the Province of Ontario has developed a guide called “Co-owning a home.” You can find the guide at ontario.ca/document/co-owning-home.
Part of More Homes, More Choice: Ontario’s Housing Supply Action Plan, this guide was developed after roundtable discussions with stakeholders to determine best practices and what advice people would need. The benefits of co-owning include more than just affordability; buyers can have access to living quarters larger than they could on their own. Someone who can afford only a compact one-bedroom suite may be able to go for a larger two-bedroom suite by co-owning.
The guide is, however, not the ultimate when it comes to the rule of law. The Province advises that it is important to obtain legal advice to protect your interests when co-buying. There should be a legal contract that all co-ownership purchasers sign to clarify rights and responsibilities. This legal agreement may possibly support an application for mortgage financing as well.
Financial outlays include mortgage payments, property taxes, utilities, repairs and home insurance. How will these be divided? In addition, there is a lot to consider besides who pays what, when. For example, how will the workload to keep up the suite be divided? How and when can the suite be used to entertain guests? If life circumstances change, can the co-ownership agreement be altered? What happens if and when one of the parties wants to leave the co-ownership arrangement?
Work with an experienced sales person who is familiar with co-ownership, as well as a real estate lawyer who understands the process. Co-ownership of a condominium suite can be an effective and smart way to enter the new home real estate market to build equity together. The great news is that mortgage interest rates remain low, so the moral of the story is to get in now, rather than later. I always say, a happy purchaser is an educated, informed one.
BARBARA LAWLOR is president and CEO of Baker Real Estate Inc., winner of the pinnacle 2017 Riley Brethour Award from BILD, and an indemand columnist and speaker. A member of the Baker team since 1993, she oversees the marketing and sales of condominium developments in the GTA and overseas. Keep current with The Baker Blog at blog.bakerrealestate.com