5 Things to Consider Before Getting a Mortgage With Family in the BC Southern Interior
Family Day 2022 is upon us in BC (February 21) which marks the perfect time to address a home buying opportunity that households throughout the BC Southern Interior have been thinking about – a family mortgage. As it sounds, a family mortgage represents the pooling of tangible and intangible resources (funds, equity, credit, etc.) amongst one’s family in order to buy a home and get more favorable terms on a mortgage. It can be a great way to enter and/or invest in the Okanagan’s hot market. As Penticton’s best known family mortgage broker we can say that this has worked out tremendously for kinsfolk throughout the community. That said, the are some key things to consider. Let’s review.
When Getting a Mortgage with Your Parents
Young adults and newlywed couples typically require a helping hand when first entering the housing market. If this is you, then one of the best reasons for getting a family mortgage is that it can facilitate access to funds for the down-payment and monthly mortgage payments. Turning to your parents (yours, or the in-laws) makes sense given that they likely have a longstanding credit history and sizable equity. For more information on how this can work to your (and everyone’s) benefit, please reference our guide to getting a mortgage with your parents.
When Getting a Mortgage with Your Grownup Kids
On the other side of the coin above, you may be the parents of adult children. Have they proposed the idea of getting a family mortgage? On the surface it may seems as if it’s just you doing them a major favor, but it can work for you and you (and your legacy) as well. A family mortgage at this stage in your life presents a great empty-nest investment opportunity, can help establish multigenerational wealth, and may even provide you with the vacation home that you’ve always dreamed of. View more on getting a mortgage with your adult children.
Shared Liability
Whether it’s a combined mortgage between parents, adult children, siblings, or cousins it’s important to recognize that unless otherwise stipulated in a contract (more on this below) all co-owners are equally liable for the mortgage. This is of significant relevance should one or more of your related investors default on their end of payments, or want to sell. This applies even when each of you holds proportionately different shares of the home’s equity. Is there anything that can be done to mitigate the potential tension or fallout that can come from such a thing? Keep reading.
Formal Joint Ownership Agreement
To avoid potential future issues with a family mortgage, secure the services of a local mortgage broker who has experience in managing group mortgages. A family mortgage broker can help you craft a formal agreement that can be submitted to the appropriate governing bodies to establish a legal joint ownership contract. This may cause some grumbling amongst certain family members at first, as it does come off as being akin to a prenuptial agreement for families. However, in the end it’s the only way to alleviate future conflicts that may arise.
Informal Ownership and Living Agreements
Is the house or condo to be shared as a primary residence or vacation home? Whatever the case may be, you should draft an informal agreement not only about use, but how you’ll make decisions about the property. This can include how you will collectively share the costs of maintenance, property taxes, utilities, insurance, upgrades, unanticipated repairs, and so forth. Be forward thinking when it comes to getting a family mortgage. If you anticipate even the slightest potential for debate about something in the future, add it into the agreement.
Do you still have a questions or concerns about betting a mortgage together? There are certainly a lot of moving parts, which is why you need to bring in a friend for your family – a mortgage broker. As a family man Rene Carloni understands the nuances of navigating real estate relationships between relations. In addition, Rene will connect you to lenders who are more open to group borrowing agreements. Lets jump on a call together to discuss the steps for moving forward. Give Carloni Mortgage Brokers a ring at 250.493.9111.
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