Should I Buy A House With Someone Or On My Own?
If you’re looking to purchase your own home, you may have thought to share the expense with your spouse or a friend through co-ownership. Affording a down payment and related costs can be a substantial expense for most people, so it’s becoming more common for individuals to team up to gain a path to ownership. Plus, there are a number of great benefits to home ownership with another person.
In this article, we’ll take a look at a number of aspects to keep in mind when deciding to buy a house with someone else or on your own.
Benefits of home co-ownership
There are plenty of benefits for purchasing a home with another individual:
- You can afford a better home than either party could afford on their own
- It’s easier to qualify for a mortgage
- Tax-breaks for homeownership
- Monthly expenses can be split to be easier to afford
- Enables individuals to build credit that they wouldn’t otherwise have
- Important decisions can be shared to avoid taking on too much risk or making a poor decision
- Co-owners can pool their resources and share skills (i.e. gardening, home repair, cleaning, IT skills, etc.)
- Having the emotional comfort of another house member rather than living alone
Despite all of these benefits, it’s important to clearly define a number of important aspects of co-ownership.
How will ownership and equity be divided?
Co-ownership of a property requires lots of forethought, but the first conversation you should have about this venture is who owns what.
While splitting the ownership equally between parties seems logical, this may not be true in every case - especially when one side invests more of their money than another. For example, one scenario could involve one person contributing ½ of the down payment while the mortgage remains in their name of the other co-owners. Co-owners may also have different incomes, so costs may be split due to the ratio of their incomes. These situations need to be carefully considered and - this is important - written down as documentation.
Having clear documentation makes it easy for co-owners to know what the expectations of each other are, as well as avoiding costly legal battles when things turn acrimonious. Similarly, having meticulous records on hand for mortgage payments, closing fees, and other expenses makes it much easier to extricate oneself from co-ownership should the partnership come to an end.
While some co-owners are friends at the start of a co-owner partnership, verbal- and handshake-agreements are not a good idea. There are plenty of instances where one party forgets the terms they agreed upon, wants to modify terms as circumstances changes, and other scenarios that can lead to time spent in a courtroom.
Handling daily aspects of co-ownership
While mortgage payments and taxes are obvious aspects of co-ownership that need to be addressed, there’s also the day-to-day expenses that will have to be discussed to avoid friction.
Making sure the utilities are paid is a big topic. While many people split bills in half, what happens if one party uses substantially more electricity than another? Longer showers? More heat during the winter? Also, who’s name will the utilities be in? Who’s in charge of paying the bills? These topics need to be talked about in detail and any problems ironed out before they become larger items of resentment.
Decisions about aesthetics of the home are important. Who makes the decisions about paint colors or rug choices? Because decorations and furniture are shared, being in accordance is necessary to keep harmony in your household. For non-shared spaces (like bedrooms), there may be less conflict unless one of the owners wants to create changes that will be expensive to fix in the future.
Maintenance is a problem for most co-owners, but there should be an even distribution of household chores between co-owners. Part of this problem can be related to an individual’s standards of living. These instances need to be addressed well ahead of time to prevent a home falling into disrepair.
For instance, regular maintenance like mowing the lawn may be performed by one person, while the other pays for groceries. Others may take turns doing chores on an alternating schedule so the burden doesn’t fall disproportionately on one’s shoulders. And if one person has the skills to repair the home, they could be compensated through comparable means (i.e. a rent reduction).
House guests are an important topic that needs to be transparent.
While singular homeowners can have guests over as they please, shared accommodations requires more foresight. This is especially important when co-owners have separate romantic partners or children, as having another person in the house for an extended period of time can put a strain on a co-ownership. Or, if an aging family member needs to move in for caregiving, would this be fine by the other home’s occupants?
Adding Upgrades and Amenities
Homes are always in a state of flux with renovations, repairs, and upgrades. Being clear about what major repairs and upgrades need to be performed is important, as these improvements may increase taxes as well as the value of the home.
Long-Term Questions to Ask about Co-Ownership
The following are some of the most common questions that co-owners need to be clear to ensure a good relationship and minimal conflicts:
- What happens if one of the co-owners dies?
- What happens if the relationship or friendship ends?
- What happens if one person wants to sell the home or leave?
- What happens if someone loses their job and is unable to make payments?
- Would they be willing to host guests through VRBO and Airbnb for extra income?
- What are the local laws regarding domestic partnership? (Local laws may supercede a co-ownership agreement in certain states)