Co-Ownership differs from rent to own or Home to Own (H20) because it allows one party, the Occupier, to buy, occupy and close immediately on a property at a slightly higher purchase price than they could otherwise currently afford to buy at.
The Occupier will eventually be responsible for paying 50% of the net selling profit (after mortgage and commission) to the Enabler whenever the property is sold. If during the term of co-ownership, the Occupier sees an advantage and certain benefits accruing and, therefore, elects to do improvements, pay down the mortgage or rent the property out, the Enabler will irrespectively remain irrevocably entitled to 50% of such resulting net profit.
The Occupier pays all the normal home ownership expenses including the:
1. Mortgage;
2. Property taxes;
3. Property insurance;
4. Maintenance;
5. Utilities and
6. earns any basement apartment rentals that may exist.
The other party, known as the Enabler, comes and stays on title without having to put any money down or pay any monthly costs. The Enabler’s risk may derive from any default suffered by the Occupier, for which default the lender may have rights against the Enabler.
There is a tailor-made Joint Venture (JV) Agreement signed by both parties for their protection catering specifically for any eventuality either may suffer, as a result of:
1. Death;
2. Insolvency;
3. Sale desired at any time;
4. Dispute
5. The desired increase in any existing mortgages by the Occupier;
6. The desired improvement to the property by the Occupier or
7. The rental of the property by the occupier.
Any pay downs to the mortgage or improvements made to the property will be at the sole discretion of and cost of the Occupier. The purchase of such a property is considered by to be one of the first 5 properties the Enabler is legally entitled to own in the Enabler’s private name.
Rationality: Although the Occupier must qualify alone, they may not qualify for a sufficient mortgage as they may desire in their preferred area. Although the Occupier pays all expenses they TOGETHER WITH the Enabler will qualify for a higher mortgage and purchase price than the Occupier will alone.
Martin Charney B Comm Alpha House Mortgage Corporation Lic #10226 magicalmortgages.ca
50/50 Co-Ownership Q&A
Q What can 50/50 Co-Ownership do for me as Buyer/Occupant if we need to pay slightly above what we can qualify for?
A By the Investor/Enabler adding his income, you become entitled to a higher mortgage and therefore, can buy higher.
Q How can you help us achieve that?
A We have Investor/Enablers who share title with you and they add their income to yours as your personal guarantors.
Q Who pays the down payment, closing costs and all normal monthly home ownership expenses?
A Because your Co-owner is guaranteeing your mortgage on your property, you do as the Occupant.
Q What does the Enabler get out of this for taking the risk that we may default any time before it is sold?
A The Enabler gets half of the net proceeds (after the mortgage and agent’s commission) when the property is sold.
Q Can we do alterations and improvements to our jointly owned property?
A Yes with the investor Enabler’s consent which won’t be unreasonably be withheld.
Q What regulates all the details that could occur?
A lawyer draws up a Joint Venture (JV) Agreement covering everything that could possibly occur
Q When can we sell?
A At any time.
Q What if we or the Enabler dies, goes bankrupt, wants to sell or is in default?
A The JV Agreement provides for every eventual.
Q Who get the monthly rental if there is a self-contained basement rental?
A You, the Buyer occupant.
Q What normal home ownership expenses do we, as Occupants pay?
A Mortgage, property taxes and insurance, maintenance and utilities.
Q What flexibility do we have?
A You can pay down your mortgage or improve and renovate the property and enjoy it more.
Q Give me an example of the 50/50 split.
A If you paid $500,000 and sold for $700,000 (5% comm.) in 3 years, you’d make make $82,500.