Question

In the last couple of years housing prices in certain areas of Canada such as Toronto and surrounding areas have risen substantially. Demand is outweighing supply and therefore driving prices higher. With mortgage rates being so low over the last few years, housing is a little more affordable but the risk is substantial when rates do go up. As an example let’s look at Mike and Ike, a couple of friends just graduating university and starting their careers. They will have some student loans to pay off but are really keen and want to get into the housing market so they don’t miss out on the potential increase of owning a house. They have never owned a home before but think this would be a good time to start and plan to co-own the new place. In order to save for a down payment they will have to really work hard at budgeting and will need to likely have CMHC as they will not likely have enough to avoid the fee (discussed later in the chapter). Let’s assume they manage a 10 percent down payment with a $400,000 home and amortize a variable-rate 2.69 percent mortgage over 25 years. Therefore $400,000 – $40,000 + $8,640 (for CMHC fees) = $368,640 as a principal owing. This is equal to a monthly mortgage payment of $1,686.47. They think this is about the same as what they are paying in rent so this seems like a great idea. However, Mike and Ike need to answer some questions before entering a housing arrangement.

QUESTION

What problems could arise in a co-ownership housing arrangement?

Answer 1

What problems could arise in a co-ownership housing arrangement?

• Although they agree to co-own the property now, they may not be compatible to live together in the same property later. This could be a major point of dispute
• One of them may want to sell the property later, but the other may not want to. It may be next to impossible to find a new buyer who would be willing to co-own the property
• When they start families, there could be issues about who gets to live there
• One of them may not be able to pay the mortgage payments regularly on time
• As both are co-owners, several issues such as repairs, maintenance, furnishing etc. may be points of disputes
• Later, one of them may want to vacate and sublet the property to someone else. This could be a problem