Buying a Home With Friends


Have you always wanted to own a home? There’s just something about having a space you can truly call your own—and it’s not just about building equity or renovating to your heart’s content.

Unfortunately, not every aspiring homeowner can make this dream come true in Toronto, where the average home price recently surpassed the $1 million dollar mark. That said, some would-be buyers have come up with a solution: purchasing a living space with friends.

Are you thinking of co-owning a home? If so, here are a few things to keep in mind…

Determine the best way to co-own

There are two major ways to legally co-own a home. The first is joint tenancy. By holding title in this way, you and your fellow co-owners have equal rights and responsibilities regarding your shared property. If one person passes away, their share will be split among the others. This arrangement is common between married couples, but it can work in other co-ownership situations.

Another way to hold title is as tenants-in-common. In this scenario, each person owns a share of the property—which will be distributed based on their will if they pass away. Needless to say, if a death occurs, things can become complicated for the surviving co-owners. In other words, think carefully about which option is right for everyone involved.

Consider your lending options

When you apply for a home loan, your lender will want to know relevant financial details for everyone on title. That could be bad news if any of you have less-than-stellar credit. Your scores will be combined, which means your financing options may not be ideal.

In some cases, it may be advisable to leave a co-owner who has poor credit off the title. A separate agreement can be used to lay out their interest in the property. It’s important to note that some lenders will be more comfortable with this type of arrangement than others. Additional factors, such as opting for tenancy-in-common, can also have an impact on financing.

Hammer out the details

Drafting a co-ownership agreement is crucial when buying a home with friends. Commonly expected details include each owner’s share in the property (if it won’t be equal across the board), mortgage logistics, maintenance and upkeep, and the rights of every party involved.

Your agreement should delve into what might happen in the future—like if one co-owner wants to sell and the others don’t. No matter how excited you are about buying a property now, taking a moment to consider worst-case scenarios could save everyone some heartaches down the line. At this stage, the focus should be on creating a document that works for all parties.

Think it through

Buying a home with friends can be a more affordable path to homeownership. While it may represent an exciting new chapter, going into it with your eyes wide open is key.

It goes without saying that your co-owners should be people you’ll enjoy living with, but consider their dependability as well. There’s no doubt that carefully drafted legal documents can protect you, but the potential for unintended consequences in your personal life is also worth considering. Know who you’re purchasing real estate with, and know them well.

Last but not least, work with an experienced real estate agent and skilled legal representative. Complex transactions require advanced expertise—so do your homework when you’re deciding who to work with!

Are you thinking of buying a home in Toronto? Get in touch to learn more about the process—and how I can help!