For many first-time buyers, breaking into the housing market can feel overwhelming. Rising home prices, high interest rates, and strict lending requirements can make homeownership feel out of reach. But an alternative path is starting to gain traction: co-buying a property with family, friends or in some cases, even like-minded strangers.
Key Takeaways
- What co-buying means and how it works
- Pros and cons of co-buying
- Smart tips for a successful co-ownership
What is Co-buying?
Co-buying isn’t new, but it’s becoming a more common strategy for people looking to achieve their goal of homeownership sooner. By pooling resources, buyers can share both the benefits and responsibilities of owning a property. But as with any major financial decision, it comes with both advantages and challenges.
Alternative Homeowners Stats from RE/MAX Canada 1
47% of Canadians surveyed would consider non-traditional homeownership models, like co-ownership or rent-to-own, in the future. |
13% of current homeowners surveyed purchased their home in a non-traditional way. |
Let’s explore the pros, the cons, and some practical steps to make it work.
The Pros of Co-Buying a Home
1. More Purchasing Power |
1. More Purchasing PowerIf you’re buying a home with just one income, your options may be limited, as you may not qualify for a large enough mortgage to buy the property you would like. Pooling incomes with other hopeful homeowners can significantly increase borrowing power. With multiple buyers, mortgage lenders may approve a larger loan, allowing the group to consider bigger homes or properties in better locations than each could manage individually. |
2. Bigger Down Payment |
2. Bigger Down PaymentAccording to Canada Mortgage and Housing Corporation, “for first-time buyers, saving a down payment can be the hardest part of buying a home.2” A larger group often means a larger combined down payment. This can lower monthly mortgage payments, help avoid costly mortgage insurance, and build equity faster. Rather than slowly saving on your own, combining your resources with others and taking advantage of programs and resources for first-time homebuyers could help you reach your homeownership goals faster. |
3. Shared Expenses |
3. Shared ExpensesIn addition to the purchase price, owning a home comes with many costs. In a co-buying scenario, ongoing costs like property taxes, utility bills, and maintenance can be divided among co-owners. This makes homeownership more manageable and reduces the financial strain on any one person. |
4. Building Equity Instead of Paying Rent |
4. Building Equity Instead of Paying RentInstead of spending money on rent, co-buyers can invest in a shared property, allowing everyone to build equity over time. Even if you only own a percentage, it’s a valuable step toward long-term financial stability and could be a stepping stone on the path to traditional homeownership. |
5. Positive Environmental Impact |
5. Positive Environmental ImpactSharing a home means fewer resources per person, whether that’s heating, cooling, or even land use. For environmentally conscious buyers, co-ownership can be a more sustainable way to live. |
The Cons of Co-Buying a Home
While the benefits are attractive, it’s important to weigh the potential downsides.
1. Financial Risk |
1. Financial RiskIf one co-owner loses a job, stops contributing, or decides to walk away, the others will be responsible for covering that share of the mortgage and expenses. This can create significant financial stress. |
2. Sharing Space |
2. Sharing SpaceUnless you’re buying a multi-unit property with separate living areas, sharing a home means adjusting to different lifestyles, habits, and needs. Even the best of friends or family members may find co-living more challenging than expected. |
3. Relationship Strain |
3. Relationship StrainWhen financial matters are involved, even strong relationships can be tested. Disagreements about expenses, household responsibilities, or long-term plans can create tension between co-owners. |
Practical Steps to Make Co-Buying Work
If you’re seriously considering co-buying, preparation is key. Here are a few steps that can help protect everyone’s interests and keep the arrangement running smoothly.
1. Establish Clear Expectations |
1. Establish Clear ExpectationsBuying a home with someone is a big commitment. Being honest and upfront about your expectations, finances, preferences and goals will help you determine if co-buying is the right option. Speaking with a mortgage broker at this stage can help you determine what’s realistic, how much you can afford, and what options are available to you in terms of lenders. |
2. Create a Co-Ownership Agreement |
2. Create a Co-Ownership AgreementA legally binding agreement, drafted with the help of a real estate lawyer, is essential. It should outline ownership percentages, how decisions are made, what happens if someone wants to sell their share, how much each person has contributed, and how disputes will be resolved. Having these details in writing protects all parties and reduces the likelihood of conflict. |
3. Open a Joint Account |
3. Open a Joint AccountA joint account dedicated to property expenses is a practical way to stay organized. Each co-owner can contribute a set amount each month, which covers the mortgage, utilities, property taxes, and a reserve fund for unexpected costs like repairs or emergency maintenance. |
4. Track Expenses Together |
4. Track Expenses TogetherIn a co-buying scenario, transparency is critical. A shared spreadsheet or document can help everyone see who has paid what, track recurring expenses, and plan for future costs. This keeps communication clear and reduces misunderstandings. |
Is Co-Buying Right for You?
Co-buying isn’t for everyone, but it can be a smart solution for those who are ready to enter the housing market but can’t do it alone. At its best, co-ownership can open doors to homeownership, help you build equity faster, and make living expenses more manageable. At its worst, it can create financial and personal stress. The key is to approach it realistically, understand the risks, put safeguards in place, and commit to clear, ongoing communication.
The difference often comes down to planning. With the right legal agreements, financial systems, and respect for each other’s needs, co-buying can be more than a stepping stone; it can be a long-term path to affordable and sustainable homeownership.
Final Thoughts
In today’s market, creativity and flexibility are often the keys to success. Co-buying offers a way to share both the responsibilities and rewards of homeownership. If you’re open to collaboration and willing to set clear expectations from the start, it just might be the strategy that helps turn your homeownership dreams into reality.
1 Alternative Home Ownership Models in the Canadian House Market
