Buying with a friend, Mortgage is paid off


Dear David,

My friend and I want to buy a house together 50/50. I have a larger part of the down payment, but his income is higher. How should we approach this? – BUDDY SYSTEM

DEAR BUDDY: With prices rising out of reach for many first-time buyers, this is a great way to get into the market, whether it’s with a friend, sibling, or someone else with whom you want to start building equity. First and foremost, touch base with a mortgage specialist to see what you qualify for (as any “couple” would when looking for a first home). Each of you brings financial strengths to this partnership and these can be pooled to your advantage.

With a budget in mind, you can start shopping. Create a “10 Most Wanted List” to help you focus on features that are important to both of you, such as location, number of bedrooms, kitchen, garage, etc.

When you purchase, you’ll register the property differently than a married couple. You’ll want to register as “tenants in common”, so that if one partner happens to depart this world, their share goes to their estate, rather than to the remaining partner (your lawyer can discuss this in detail).  Since you’re contributing a larger portion of the down payment, your lawyer should also draft the agreement in a way that allows you to recoup the difference when you eventually sell the property.

PRO TIP: Make sure to discuss potentially sticky details in advance, such as who gets the master bedroom, who gets to use the garage and how long do you plan to stay in the home. You’ll also want to have a plan for potential separation, in case the arrangement doesn’t work out.

Dear David,

After 25 years, we finally have our house paid off. We still have 7 years left to work, where do you think we should we go from here? – NEXT STEP

DEAR NEXT: Congratulations on paying off your mortgage! This is a good time to assess your finances and risk tolerance, since the monthly budget that paid off your mortgage can now be used in other ways.

Topping up your RRSPs is fine if you’re looking for a tax reduction, but your investment can be vulnerable to market volatility. Alternately, you may want to consider building a real estate portfolio. By combining your monthly mortgage payment with the rent a tenant is paying, you can pay down an investment property quickly and with less financial burden than a primary mortgage (a mortgage specialist can build in this flexibility).

With seven years left before you retire, a rental townhouse is an example of a property that could be paid down rather quickly, while potentially providing you some extra monthly income in your retirement.

PRO TIP: You don’t need to be a landlord. There are management companies that deal with everything from screening tenants to collecting rent. If you purchase an investment property, you may find these services are money well spent. #AskDavid #Advice