Buying with friends or family may let you buy a home sooner

In an environment of consistently rising house prices and higher mortgage rates, it's no surprise that a high percentage of Canadians (68%) expect to purchase a home with their partner or spouse. One-quarter (26%) of prospective homeowners plan to buy a home independently. And relatively few expect to purchase a home with a family member (4%) or a friend (2%).

While just 2% of respondents in our study, Statistics Canada reports that households composed of roommates (not family members) are the fastest-growing type of household type, increasing by 54% over the last 20 years. Multi-generational or multi-family homes also increased (45%) over the same period. 

Growth in these two groups, in large part, reflects growing housing unaffordability and unavailability. So, why aren't more people joining the housing market with friends or family?

The benefits of pooling financial resources with your family members or friends to purchase a home can be significant. It means you can get to a minimum down payment faster or have a larger down payment, which reduces the size of your mortgage, and could save you the cost of mortgage insurance premiums. It could allow you to get into the property market more easily and may allow you to purchase something more significant. And living together with your co-owner(s) also means you can split the bills and maintenance expenses. 

On the other hand, co-owning and sharing that home with friends or family can be a complicated endeavour. A home is a long-term financial obligation. Circumstances can change, as can relationships. One co-owner may get married, lose a job, or inherit a windfall. If one co-owner defaults on their share of the mortgage payment, it can damage the credit score of the other owner(s). If your co-owner wants to sell and you don't, you may need more funds to qualify for mortgage refinancing on your income alone. 

So, while there are some benefits and can be a great option to get into the market, everyone needs to be on the same page, fully understand, and be responsible for their financial and personal obligations during the purchase. 

Before you sign on the dotted line, make sure you and your co-owner(s) are clear on the details. Here’s a starting list of questions you should be asking:

• How much will each of you put toward a down payment?
• How will you split the mortgage payments?
• How long do you want to own the home?
• What are you looking for in a home? What features are required (number of bedrooms, a backyard, home office, parking)? What type of home (detached or semi-detached, condo)?
• How will you split living expenses and home maintenance costs?
• How will you handle changing circumstances (financial, health, relationships, etc.)?

Hash out all the details to get a clear picture of how things will work financially and in your day-to-day living arrangements, and then write it down. You should have a legal agreement that defines each owner's financial responsibilities and sets out how different scenarios will be handled. 

Regardless of how you plan to get into the housing market, there are accounts that can make saving for a down payment a little bit easier.   

The First Home Savings Account (FHSA) allows you to contribute up to $8,000 a year (lifetime maximum $40,000). Like with an RRSP, your annual FHSA contributions can be claimed as an income tax deduction and when the savings go to a qualifying home, the withdrawal is not taxable.

The Home Buyer’s Plan (HBP) in your Registered Retirement Savings Account (RRSP) allows first-time homebuyers to withdraw up to $35,000 tax-free from their RRSP to purchase or build a new home.

Funds in your Tax-Free Savings Account (TFSA) can be used toward a home purchase. The savings are easily accessible, and withdrawals from your TFSA are tax free and can even be recontributed later. You can use your TFSA savings in combination with the HBP and withdrawals from an FHSA.

In today's challenging housing market, co-ownership can be a viable option for singles, families, or friends looking to purchase a home. While it can be a complicated endeavour, co-ownership can also offer significant financial advantages. If you're looking to purchase a home, start exploring your options today and take advantage of the resources available to help you achieve your goal.

About the Study

An online study of 2,016 Canadians aged 18+, including n=433 credit union members, was completed between December 12 and December 21, 2023, using Leger’s online panel. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, a probability sample of 2,016 respondents would have a margin of error of ±2.2%, 19 times out of 20.

^{Aviso Wealth Inc. ('Aviso') is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Aviso Financial Inc. (including divisions Aviso Wealth, Qtrade Direct Investing, Qtrade Guided Portfolios, Aviso Correspondent Partners), and Northwest & Ethical Investments L.P.}

^{The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.}