Buying a home with a partner or friend: how to set it up

Pooling money with a partner, friend or relative can help you buy sooner. It also ties your finances together, so it is worth setting the terms before you sign.

The short version: decide how you will hold title, put the deal in a written co-ownership agreement, and get independent legal advice for each person.

How you can hold title

When two or more people buy, they hold title in one of two main ways:

• Joint tenants own the property equally, and when one dies, the other automatically becomes the owner. This is called the right of survivorship.
• Tenants in common can own different shares, such as 70% and 30%, and each person's share passes to their heirs through their will.

Joint tenancy suits couples who contribute equally. Tenants in common suits friends or relatives who contribute different amounts, or who want their share to go to their own family.

Joint mortgages

Joint mortgages are usually joint and several, which means each borrower is responsible for the entire debt, not just their half. If one person stops paying, the lender can ask the other for the full amount, and everyone's credit is affected. All borrowers' incomes and debts count in the qualification.

Married, common-law and friends

Property rules on a separation differ by province and by whether you are married or common-law. Unmarried partners and friends may not have the automatic property rights that married spouses do in some provinces, so a written agreement matters.

What the co-ownership agreement should cover

A co-ownership agreement prepared by a lawyer can cover who pays what and what happens if someone wants out, sells, moves or dies.

• Each person's share and contribution to the down payment.
• Who pays the mortgage, taxes, insurance and repairs.
• How a buyout works, and how the home is valued.
• What happens if someone cannot pay.
• What happens on separation, illness or death.
• Whether you can rent out a room or sell your share.

Example

If you put in $70,000 and a friend puts in $30,000, tenants in common with 70/30 shares match your contributions, while joint tenancy would split ownership 50/50.

Tax points

• If you are co-owners, only one home per family can be designated as a principal residence for a given year.
• Gifts toward a down payment should be documented as gifts, not loans.
• Rental income from a shared property is split according to ownership.

Ask an accountant about your situation.

Before you buy

Get independent legal advice for each person before you buy, since a lawyer cannot represent conflicting interests. It can save a lot of conflict later.