Apr 28, 2021

Buying A Home Tenants In Common

With home prices going through the roof, it may be necessary for single people to buy a home with a friend or relative.  Usually doing so would require purchase as Tenants in Common.  That means ownership based on the percentage of down payment.  So, if each party comes up with 50% of the down payment, the ownership position would be 50/50.  The mortgage presumably would be in both names, which means each person must qualify for the loan.   

That is the easy part.  There would need to be a side agreement to deal with the What If's.  What if one of the buyers later wants out of the deal?  What if one of the buyers dies or need to relocate for a job?   It could be that unless the agreement is extended by mutual agreement, that the home is owned for the sooner of both deciding to sell or 5 years.  This does not mean that the home must be sold within 5 years; but it would at least create a date certain if one party wanted out of the deal. 

Either way, if one person chooses to sell their interest in the property, it is possible provided the arrangement allows the other person to agree on the buyer he or she will now be living with.  It could mean the need to get a new mortgage.  The best possible scenario would be turning the home into a rental investment some time down the road, which requires a whole different agreement.  

Buying a  home Tenants in Common is basically two people coming together to make an investment in real estate.  It could work out just fine provided there is a side agreement in place that clearly deals with the What If's.  If that is not done, this investment could turn into a big mistake.