It’s no secret that homes in the country are expensive. In addition to the rising home prices almost everywhere, people are dealing with other financial hindrances including student loans, inflation, and more. Co-Buying a home is a way for people to alleviate a lot of the financial burdens that come alongside purchasing a home. This practice sounds great in theory, and in many ways, it is! However, buying a home with someone else, especially someone who isn’t a spouse, can cause some issues. If this is something you and someone else are pondering doing, here are the pros and the cons of co-buying a home with someone.
The Pros:
Splitting Finances
One of the biggest reasons that people choose to co-buy is because of the financial aspect. Splitting the costs that come alongside homeownership including the down payment, realtor fees, mortgage payments, utilities, repairs, and more. As we mentioned earlier, buying a home can be expensive. Doing so on your own is even more costly. By having someone to split the finances with, you will be more likely to afford a home.
This is the same with chores and repairs as well. As you continue to own a home together, completing necessary chores and remodeling tasks will feel much more manageable and affordable. Splitting up tasks among multiple people will also help keep the home more intact which can save money down the road as well.
Ability to Afford a Down Payment Sooner
One of the biggest deterrents that keep people from buying homes sooner is the down payment. Having a sizable down payment ready will not only make you more likely to obtain a mortgage but will also make your monthly payments much smaller. Many lending companies expect people to contribute a high down payment and having someone to split that initial upfront payment with will make the process more affordable.
Chores are More Manageable
The Cons:
Everyone is Equally Responsible for their Share
Splitting a purchase as large as a home is only beneficial if everyone who is on the mortgage is able to make their monthly payment. If someone is having a bad financial year, someone is going to have to pick up on the payments. In the event that other co-owners can’t do their fair share, and you don’t have the means to cover their portion, everyone is in trouble.
The Interest Rate is Determined by the Lowest Credit Score
A big factor in determining what the terms of the mortgage are going to look like is the credit score. Unfortunately, if multiple people are co-borrowing, and someone has a poor credit score, then the interest rate is going to be determined by theirs. If the person you plan on splitting a home with has a low credit score, see if they would be able to boost it prior to applying or consider alternative options so as not to be stuck with a high-interest mortgage loan.
As you can see, co-buying a home can come with a long list of pros and cons. When making this decision, it’s best to contact and interview real estate agents to get a good idea of what the best route would be in this situation. Choose wisely and always keep the floor open for communication!
