What Is Co-Ownership?
What is Co-Ownership?
Co-Ownership may be the latest buzzword in Toronto real estate, but what does it mean and who can benefit from this type of arrangement? While it can take many forms, co-ownership can be as simple as two or more parties sharing joint equity in a property. The reason for the current spike in popularity of this type of ownership is multifaceted.
There are as many different scenarios for choosing to share a home as there are types of buyers. The broadest appeal is among first-time buyers, downsizing seniors, and multigenerational families. A group of friends who can’t afford to buy on their own may want to invest in a home together. Families with young children may be able to buy a beautiful home near a park, which would have been out of financial reach on their own, can also share the cost of child care. Downsizing seniors can divide a house into four living quarters while sharing a common kitchen to increase social interaction. They can potentially share assistance if the need arises. A young couple, who might not be able to qualify for a mortgage on their own, can build equity by buying a duplex house with their downsizing parents.
The main reason buyers are interested in co-ownership is simply that it’s financially more feasible. Each owner will have a lower down payment and an easier time qualifying for a mortgage. You can look for a group mortgage, and all the percentages of ownership don’t have to be equal. It is also possible to have one title and two separate mortgages under one umbrella. Find a good mortgage agent to advise you on the options. Other costs are also shared among the owners, such as property insurance, property taxes, landscaping, repairs, and maintenance. But beyond the financial benefits are the social. This is especially great for aging seniors who reap mental and cognitive benefits from socialization, as well helping to maintain their self-esteem and sense of self worth.
Get it in Writing
Along with the benefits are some drawbacks. Conflicts can arise, so better to have a sound plan in place before entering into this sort of arrangement. What if one owner wants to sell, or is in default? What if the living situation becomes untenable for some of the residents? There has to be an agreement in place to deal with whatever comes up. The great thing about this sort of arrangement is that you can create an agreement that is tailored to the specific needs of the owners. The more you discuss upfront, the better. If the parties go into this agreement knowing the potential remedies, conflicts are less likely to occur and should be quickly resolved. Find a good lawyer to help you draw a plan so that everyone understands the expectations going in.
Before you put in an offer on a house, find out the zoning. The neighbourhood you want to live in may restrict usage to single family residency. If there area is zoned for multiple units, another thing to consider is the number of units in the house. Any property with more than four units is considered commercial and with that comes higher property taxes.
Meeting the Need
In the GTA, we are currently experiencing a housing shortage with the rental vacancy rate at only 1%. If co-ownership housing became more prevalent, it would create more housing. More housing will help attract more young people to the city, which could in turn bring in more industry. Legislators should be made more aware of the need for multiple-unit housing.
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