It’s no secret that real estate in Vancouver is expensive. Most Canadians know it to be the country’s priciest real estate, but a lesser-known status symbol is that Vancouver can boast of being the second-most expensive major English-speaking city in the world in which to own a home — behind only Hong Kong.
What that ultimately means is that most home buyers must find creative ways to fulfill their dreams of home sweet home. Increasingly, that means thinking outside of the model of waiting for a romantic partnership to develop and blossom into ownership, says mortgage development manager Ryan McKinley of the financial institution, Vancity. “We see siblings finding ways to share a home, or friends pooling their resources to get a place,” McKinley explains. “Even the way we see parents helping their children out is evolving — [they see it as] a co-ownership agreement, instead of just handing over a lump sum of money.”
Vancity has developed specific software called a Mixer Mortgage to address the need for creative financing options. The easy-to-use and free program allows each partner to set the style of mortgage (variable versus closed rate, monthly versus weekly payments, etc.) that works for them.
Still, McKinley stresses the importance of partners addressing central questions before even getting to that stage. “We call it a co-ownership checklist. It includes talking about what happens if one party wants to sell and the other doesn’t; or, what are the rules if one partner decides to get married — how do you bring the new person into the existing agreement?”
Here are McKinley’s top three points to consider before entering into co-owned property agreement.
How do you divvy up the pie?
What percentage will each partner own of the home — and how will that translate into day-to-day expenses? If Partner A puts up 60% of the down payment, is that partner also responsible for paying exactly 60% of all of the expenses? Or would Partner B cover off more of the day-to-day expenses, to eventually work the agreement back to a 50-50 ownership split? If one partner gets into unexpected financial difficulty, what happens then?
How long are we talking, and what if someone else wants a piece of the pie?
What is the time frame and structure of the ownership agreement? If, for instance, Partner A definitely wants to sell in five years, does Partner B get the first right of refusal on 100% ownership, or would that trigger putting the home up for sale on the open market? What happens if a partner’s personal situation changes, i.e. a marriage or a divorce or an inheritance scenario? What are the rules around bringing in an additional partner, or removing an existing one — and how do you ensure the interests of all of the partners are protected?
What happens to the extras?
When friends have purchased a property in which they intend to live together, like an apartment or a condo, McKinley says it’s important to have an inventory of who owns what in the home, from furnishings to dishware. In some shared-house scenarios, like couples co-owning a duplex, there might be tools and machines purchased to maintain a property, like ladders or a lawnmower. How will those be factored into the partnership?
All of this may seem a little daunting, but McKinley says it’s better to deal with the issues up front — in the long run, it will (hopefully) make things go smoothly when you begin the experience of owning your own home.
Claudia Kwan is a Vancouver-based freelance journalist and multimedia producer for Global TV, CBC Radio, The Vancouver Sun and various food & beverage publications.