Would you buy a home with your roommate?
This is the very question that many Millennials are now considering. "Co-buying" is a new real estate trend where roommates, friends, or family members are now splitting the financial responsibilities that come with the home buying process. Individuals are committing to this partnership when they don't have a spouse to split the home costs with, or are looking to invest but can't afford it on their own. Below, we give you the risks and benefits of co-buying.
- Home buying is a major commitment. If either party wants to back out of the obligation after escrow closes, they won't be able to do so easily. One owner would have to take over their half of the equity, or both would have to agree to sell the home. Most roommates just argue over who finished off last nights vegan pad thai! This scenario could potentially make for some extremely awkward situations.
- The responsibilities hold more weight. Owning a home comes with a lot of maintenance. Knowing how to divvy up the chores beforehand would be crucial to surviving home ownership together. Suddenly it's not just a question of who needs to do the dishes, you also have termite, landscaping, HVAC, plumbing, and other major home ownership responsibilities to consider.
- You put your credit at stake. Owning a home with another person means that they could potentially default on their portion of the mortgage and utilities, and that makes you responsible. Creditors won't care that you two went 50/50 on the home purchase, they are just looking to see who is on the title.
- You get more bang for your buck. Mortgage lenders will qualify you for what you earn jointly, regardless if it is a family member, friend, or acquaintance. They also will average out credit scores based on the two. So, if you are lacking in either of those categories, you will qualify for something more than you could on your own. You will also be able to buy a more desirable home to live in with two incomes to go forward.
- You may be able to afford an investment property. Co-buying is not only for first time, primary residence buyers. Being able to spit the costs of home buying with a business partner could mean you could kickstart a real estate portfolio now. Plus, being a co-investor takes some of the pressures away since you don't have to live with your partner.
- Buying with another will give you equity that you can use on your first solo home. Co-buying allows you to look at the co-purchase as a nest egg for any future dreams you have of buying a home solo, or for a family. With every monthly mortgage payment, you are gaining equity on the home you live in. Just be sure that you both agree to sell the home at the same time to have a seamless home sale, at the top of the market.