Many Canadians are looking for a joint mortgage, on the one hand because the new mortgage rules make individual qualification more difficult and on the other hand to mitigate financial risks, not to mention that homes in Canada are just not what they were. However, is it a good idea? It turns out that there are many reasons why a joint mortgage is not necessarily a good idea. Let’s take a look at some advantages and disadvantages:
Advantage: a smaller down payment
Usually, the minimum down payment required to qualify for a mortgage is 5%. To avoid paying mortgage insurance from CMHC, you will need a 20% down payment. If you are looking to buy a house worth $ 500,000, the first installment will be very expensive. Sharing your mortgage with another person makes your first payment more accessible and your mortgage payments significantly lower.
Disadvantage: the other person decides to leave
Obtaining a common mortgage may seem very advantageous on the financial side at the outset; however, if you or the person with whom you have chosen to share the mortgage decides to leave, you may find yourself in a very difficult situation. You might not be ready to compensate for each other, which could result in an early sale, this is not your initial wish.
Benefit: increased accessibility of a mortgage
Buying a common mortgage property can also result in an increase in purchasing power in that the maximum mortgage amount increases. If you and your mortgage partner share the purchase of a new property, you can have access to a larger and better located property, and therefore a better lifestyle.
Disadvantage: one of them loses his job
It could happen that your mortgage partner loses their job, and the same thing could happen to you as well. In this situation, one of you will have to take charge of the other and when this happens, the many financial benefits of a joint mortgage begin to lose their value. Here are some relevant questions to ask yourself: How long do you have to cover other costs? When can the other person repay you? Of course, one way to reduce the risk of this happening is to jointly contribute to a savings fund, but the fact remains that the scenario mentioned above remains likely.
Advantage: Less expensive maintenance
When you share the costs of a mortgage with someone else, you also share the maintenance costs of the property you choose to buy. The mutual benefits are easy to notice: if the roof needs to be repaired, if there is a fault with the hot water tank or if the windows need to be renovated, you will be able to share the expenses. It’s easy to find comfort in the fact that you do not have to pay these maintenance costs alone.
Disadvantage: Friendships do not always last forever
The same story that always comes down to collocated friends is also about common mortgages: money can sometimes break ties of friendship and family ties. In fact, only the difference in lifestyle choices between the two can make the connection incompatible and that would be a good reason in itself to avoid a financial transaction like this. Be very careful when choosing your mortgage partner because the financial consequences can be very serious if things do not go according to plan.
A final important point: although there is no denying the attraction of sharing the high costs of a mortgage or house with a close friend or spouse, putting both names on the mortgage and the property may have other undesirable effects. For example, if you are both attached to a mortgage, you will have trouble qualifying for another mortgage (individually or collectively) if you choose to buy another property in the future. If any of you can avoid legal interleaving, you will have easier access to approval of future loans.