An increasing number of Canadians are exploring the idea of co-homeownership during an economic environment of high property value, high mortgage rates and the rising cost of living. Many are contemplating pooling their financial resources with family members, friends and even strangers to gain access to the Canadian housing market.

In fact, according to a recent Royal LePage survey conducted by Leger, six per cent of Canadian homeowners co-own their property with another party, not including their spouse or significant other.

Of this group, 89 per cent co-own with family members and seven per cent with friends. Another eight per cent co-own with someone who is not a friend or family member.

Seventy-six per cent of co-owners say that affordability was a major motivating factor in their decision to co-purchase their property. Not surprisingly, that number rises to 83 per cent for co-owners between the ages of 25 and 34.

“Households group together for many reasons, including communal care for elderly parents, help to raise children, cultural preferences or simply to be together. However, the decision to live together, including co-owning a home, is a decision increasingly made for financial reasons,” says Karen Yolevski, COO, Royal LePage Real Estate Services Ltd, in a statement. 

As realtors and other industry professionals witness this growing market, there’s a service to accommodate this new demand.

A creative solution in a tough rental market

John and Lea-Ann Gimblett have launched Co-Own My Home, which provides a matchmaking service for frustrated buyers unable to purchase a home due to prices, down payment or mortgage income qualification. The company is based near Barrie, Ontario, and the service is being offered in Ontario for now but could expand outside the province in the future.

“(In) the last 12 to 18 months there have been a lot of issues with homeownership,” says John, the company’s president who has been in the mortgage business for about 12 years. “One of the things that was unsettling to me was that because of prices and interest rates, the stress test and a lot of different items, we were having to turn down some really decent young families for homeownership.”

He points out that these are families with good credit that have saved a down payment, with about $100,000 household income, yet they can’t qualify to buy a townhouse in southern Ontario. The alternative is to borrow from family and friends.

“In the old days, it used to be $20,000 for a family – now, it’s $200,000 and most of my clients just don’t have that available, and they don’t have a family backup (to) go on a mortgage and provide additional income. So, many of these people are destined to end up as renters, maybe for the rest of their lives,” says John.

The challenge is the rental market is the second shoe to drop, and rates keep rising. “If they’re destined to be renters because they can’t own, now they’re into these crazy rental prices which used to be $1,500 for a two-bedroom apartment, but now it’s $2,500 or $3,000 in certain cities. They’re paying these huge rents, and that money is getting thrown out the window every month.”

Canadians aren’t too optimistic

There’s no alternative with no family backup, and growing numbers of Canadians believe they will never be able to own their own home, as a recent Mortgage Professionals Canada report indicates. It notes the share of non-homeowners in Canada who think they will never be able to buy a home has increased by 15 per cent over just six months. This figure stands at nearly half (48 per cent) as of this summer, up from a third (33 per cent) at the end of last year.

“That’s ridiculous,” laments John, adding that co-homeownership is now a trending topic. “Would most people want to buy on their own? Absolutely. But they can’t qualify.”

How the Co-Own My Home matchmaking service for co-homeownership works

Co-Own My Home introduces buyer candidates throughout Ontario to one another. The result is an ownership partnership that allows those unable to qualify on their own to qualify together, by pooling down payments and incomes to buy a home.

“Likeminded pre-qualified candidates, previously denied access to ownership, can benefit from the extensive Co-Own My Home qualifying process that embraces transparency,” John mentions. “The whole process is transparent. People have to have some faith in the other party (and) know as much as they can about them.”

Upon successful completion of the qualifying process, individual potential matched buyers may agree to a video meet-and-greet introduction. From there, if both parties are satisfied with the connection, a second face-to-face meeting moderated by a Co-Own My Home team member takes place and results in a decision to proceed or a request to provide a different candidate match.

The Co-Own My Home team facilitates recommendations to pre-qualified experienced realtors and mortgage brokers. And, they point out that a lawyer-prepared partnership agreement is an integral part of this and any co-homeownership purchase. The company ensures they’re matching clients with a lawyer experienced in real estate co-homeownership.

The six-step process looks like this:

1 Agreement. Clients apply and meet with the Gimbletts and an agreement is made to work together.

2 Suitable partner. Co-Own My Home introduces qualified co-owner partners by getting an understanding of the wants and needs of clients. All applicants are vetted. If both parties wish to proceed with the online meet-and-greet, Co-Own My Home arranges a second meeting online or in person.

3 Mortgage financing. Clients are referred to an experienced mortgage broker upon receipt of their approved service agreement. The broker starts qualifying them for home financing and will seek the best mortgage rate and terms for the buying partners.

4 Viewing properties. Clients are guided by an experienced, professional realtor from property showings until closing.

5 Co-Tenancy agreement. The lawyer-prepared co-homeownership agreement is a very important part of co-purchasing a home and includes credit and police checks for all parties. Contentious items suggested by a client’s lawyer as well as any item clients deem important should be included, too.

6 Benefits and future sale. The homebuyer co-homeownership agreement will include provisions for the future sale of the property and division of net proceeds from any sale will follow the terms of the co-homeownership agreement. If all parties are happy with the partnership upon maturity, they can simply have their lawyer extend the partnership for another period of time.

An income stream for realtors

When it comes to sourcing clients interested in co-homeownership, John mentions, “Every realtor in Ontario has a file of good clients who just can’t buy in this economic environment. The file is put away and it gathers dust … the nice thing is when the two parties have decided to buy together, the deal goes back to the realtor that originally referred the clients to us. Rather than have a file that sits in the cabinet, now (they’ve) got a deal that actually happens – everybody’s happy.”

Lea-Ann, also a realtor with Century 21, says this is not like communal living. The properties sold under a co-homeownership arrangement would have two separate entrances, two kitchens and totally separate living spaces.

Crunching the numbers

There’s no cost to the realtor for Co-Own My Home’s service, but each party is charged a fee of one per cent of the purchase price.

It’s up to the parties to decide on many details of the arrangement. This includes everything from downpayment amounts (though 50/50 is suggested), handling when someone wants to sell the home and responsibilities for maintenance and other homeownership costs like utilities. 

All of these details result in a partnership contract anywhere from 15 to 20 pages long. “It’s a bit of a long process … because we want to get it right from the start,” says Lea-Ann.

The concept has just started and it has received quite a few applications so far. The Gimblett’s look forward to their first match.