Parent-Child Home Co-Ownership: Is It Right for You?
Every generation of first time homebuyers faces their own unique challenges. A recent report from Statistics Canada suggests that young people in BC are turning to family co-ownership as a means of overcoming some of those challenges. In fact, in BC, one out of every five residential properties owned by younger Millennials and older Gen Zers – those born in the 1990’s – is co-owned with a parent.
Reasons for co-ownership vary. In some cases, co-ownership is a purely financial decision. The adult child lives in the co-owned property while the parent lives elsewhere. Or, co-ownership can be based on social factors, with multigenerational living situations allowing for shared childcare responsibilities and combating social isolation.
But is co-ownership right for your family? Whether it’s finding the perfect multigenerational home or navigating the complexities of mortgage co-signing, at Stilhavn, we understand the benefits and challenges associated with co-ownership. Here are a few things to consider if you think this options could be for your family.
Benefits of Co-Owning with Family
Increased Buying Power and More Affordability
Combining finances with a family member typically allows buyers to qualify for a larger loan. Further, shared monthly costs can help to improve affordability.
Building Equity
As you pay down the mortgage, both parties build equity in the home. This provides a return on investment and longer term financial security.
Potential Tax Benefits
In some cases, co-ownership may provide tax deductions for mortgage interest, property taxes, or capital gains when the home is sold.
Shared Responsibility
Co-owning can mean sharing homeownership duties like maintenance and repairs. This can ease the burden, especially for aging parents.
Challenges of Co-Owning with Family
While co-ownership has benefits, it also comes with some things to consider:
Agreeing on Shared Decisions
As co-owners, you’ll need to agree on any major decisions regarding the property, including renovations, rental and the eventual sale of the home. Conflicting opinions can strain relationships.
Unequal Financial Commitment
If one party provides more for the down payment, they may want a larger share of proceeds when the home sells. This should be discussed upfront.
Complicated Exit Strategy
Selling a co-owned home requires navigating each person’s share of equity. Exiting the arrangement may be difficult if you have a falling out.
Questions to Ask Before Co-Owning
Before taking the leap into co-ownership, have an honest conversation about the following:
How much will each person contribute to the down payment and monthly costs?
How long do you plan to co-own the home? Under what conditions would you sell it?
What renovations or changes can each person make without approval?
What happens if one person faces financial hardship and can’t make payments?
What if one owner wants to move in with a significant other or new spouse?
How will household chores, repairs and maintenance be divided?
How will you resolve conflicts if they arise?
How will proceeds be divided when the home is sold?
Putting it in Writing
To prevent misunderstandings, put the co-ownership details in a written agreement. Having things in writing provides legal protection if disagreements come up and helps to avoid any strain on the relationship as a result. The agreement should address important topics such as ownership percentage, cost division, occupancy rules and repairs.
Considering co-ownership with a family member? Reach out to a Stilhavn REALTOR® today. Our experienced team of industry leading professionals can guide you through the ins and outs of co-ownership.
