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Financing Shared Housing: Co-Living’s Impact on Mortgages

Financing Shared Housing Co-Living's Impact on Mortgages

You must go back two decades to understand how co-living arrangements influence the mortgage industry and the real estate market. A Canadian Mortgage and Housing Corporation (CMHC) report highlights how affordability has declined over the last twenty years and that Canada has yet to respond to the demand.

That’s part of the reason for a rise in co-living and co-ownership. It’s an emerging housing trend that’s influencing the mortgage financing industry. Co-living is an arrangement where two or more people live together and share expenses and living spaces like kitchens and living rooms. Some can buy the property or home and divide it into separate units. 

Private loans are an excellent choice for people who don’t meet the criteria of more traditional banks and credit unions and want to take advantage of this trend. The processing time is quicker and doesn’t place a big emphasis on items like a credit score.

How is Co-Living Changing the Housing Landscape?

Co-living has a historical precedent. The term originated in Denmark in the 1970s and began with families living in private homes but sharing spaces for activities like housekeeping, dining and festivities.  

 These co-ownership arrangements in Canada include one launched in the Toronto area in January 2022. Husmates use community and technology through people willing to find a group of co-owners or one individual. 

The number of available options using these types of arrangements is growing, and there’s a need for innovation. For example, co-ownership requires new insurance and financial arrangements to cover property, mortgage, and tax payments.

How They Share Operating Expenses 

Co-owners must also decide how to pay for and share operating expenses and fund significant renovations and repairs. The way renovations are carried out is different under a co-living arrangement. For example, building codes are set out when co-owners begin to create separate units with individual bathrooms and kitchens.

Co-owners must understand zoning bylaws and what they need in building permits. It’s important to remember that the different building code requirements depend on the age of the house and other factors.

Overall, co-ownership makes homes more accessible, and it’s changing the housing landscape by contributing to sustainable living practices and optimizing resources for the use of space.   

What Mortgage Options are Available for Co-Living Properties?

Various options are available, including ownership through a corporation, joint tenants, and common tenants. People looking for mortgages in the space can include seniors who want to pull their resources and different families who want to co-own a house for several years until they can buy their own. Be aware that cooperative housing is a totally separate category from the ones listed here.   

  • In some circumstances, lenders will consider joint mortgage applications where savings and income are combined, resulting in a higher pre-approval amount. The options available are called a joint tenant structure, and they’re commonly used by family members and joint law partners, who share ownership of the property equally.
  • Tenants in common is another option, allowing people to each own a portion or different percentage based on their financial contributions.

People seeking a co-living arrangement must examine the other partners’ financial, legal, and qualifying details. Most lenders will want to know why multiple people are applying, so each person should have a robust application.

Sometimes, people with a high debt load or weak credit score aren’t the best options at the pre-approval stage. However, their down payment and income can be used in some situations. 

What are the Financial Benefits of Co-Living Mortgages?

This arrangement has several benefits, including affordability, which is at the top of many lists. Getting involved with a co-living mortgage means people can pool their resources to buy a home. 

With these types of mortgages, people can choose from locations that might not be within their budget. For example, co-living mortgages can allow some homeowners to look at residential communities with primarily single-detached homes.

These types of mortgages have other benefits that include:

  •  The possibility of lower interest rates is due to a combined financial profile.
  •  There’s also more flexibility in ownership for the people involved. These can work with people with different financial goals and those who have made other contributions.
  •  Co-owners also spread out the risks associated with home ownership, like market downturns and unexpected repairs.

Of course, co-ownership allows people to put together a larger downpayment. Some people plan to co-own a property or house for several years until they can buy their property.

How Can Borrowers Navigate Mortgages for Shared Housing?

There’s a strong sense of community engagement regarding co-ownership as residents work towards common goals. Shared equity investment providers can help with a down payment for some eligible people. 

Alternative lenders are an option for getting a mortgage when you want to share a house and ownership. One of these arrangements works to everyone’s advantage if there’s already equity for something like a second mortgage. Private lenders usually require over 25%.

At any rate, various government programs, like the Home Buyers Plan, allow people to withdraw from RRSPs to qualify.

Looking for a Co-Living Private Mortgage? 

Mortgage Broker Store focuses on numerous mortgage-related products. One of our priorities is mortgages that don’t meet traditional lending institution requirements. Our team includes private lenders, brokers, and authorized mortgage agents. Let us help you prepare for and get a product that meets your requirements. 

Email ron@mortgagebrokerstore.com or call 416-499-2122.

About Jonathan Alphonso

Mortgage Agent, Web Developer, and Real Estate Investor. Together with Ronald Alphonso I run MortgageBrokerStore.com. I write about a variety of topics on Canadian mortgages and real estate. Our particular specialty is dealing with Ontario power of sale and foreclosure situations.

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