How a co-mortgage works — and why some Canadians are considering them

There's no denying the cost to buy a house and afford a mortgage continues to be troublesome for many Canadians — shutting some people out of the housing market completely.

The Canadian Real Estate Association (CREA) says the average selling price of a home in September was $655,507. That's an increase of 2.5 per cent from this time last year. 

The benchmark interest rate remains at five per cent after the Bank of Canada held the line last month. However, the central bank didn't rule out future interest rate rises, and some say the slowing economy may only be just starting its downturn.

As an alternative, this Ontario brokerage company is pushing co-mortgages.

This is where multiple people go in on a home together — and we're not just talking about just family or friends.

LISTEN | The pros and cons of co-mortgages are discussed on CBC's Windsor Morning:

Joe Bondy, with Dominion Lending Centre in Windsor, Ont., is promoting an event called Super Mortgage Mingle. 

He says it's a chance for would-be homebuyers to meet like-minded people with similar housing aspirations — in many ways similar to online dating.

"The idea came about back from when I was in university, and I was paired up with a roommate and we had to live together and coexist and everything went fine," he said.

"Over the last few years, I've found that more and more young individuals or people who went through marital splits are struggling with home affordability or homeownership."

He compares it to an investment forum and expects 30 to 40 people.

According to Bondy, the co-mortgage mingle would consist of around 30 to 40 people, all of whom are pre-approved for around $300,000 from their banks — not enough to buy a house in Windsor. But jointly, they can build a relationship and, down the road, afford to build or buy something together, he says.

"At the end of the day, if they're 50-50 and they have to sell the property while they each get 50 per cent of the tax free dollars that we get when we sell our principal residence. This is good for principal residence people because they get that tax free dollars."

Now, Bondy says there's also a need for the alternative concept in smaller centres that target a younger generation.

The average price of a house in the Windsor region in September was just under $537,000, according to the Windsor-Essex County Association of Realtors.

The idea of mortgage sharing is not entirely new in bigger Canadian cities such as Vancouver and Toronto.

Rasha Ingratta says co-mortgages can be fraught with issues.

The mortgage specialist with Mortgage Intelligence in Windsor says cohabitation isn't new, and is happening more often but it's normally between family or close friends.

"The only issue that I have is when strangers come together. They are strangers. You are putting them together," she said.

Ingratta says she's currently dealing with a similar situation where one of her clients cosigned for a vehicle with her ex-boyfriend.

"He didn't qualify and they bought the vehicle together. And now he does not qualify to buy her out or take over the vehicle."

According to Ingratta, if friends are buying a property together and they're going to live in it, it's also important to determine if it's a long or short term investment for both parties. 

"What happens if a person decides to have a girlfriend or a spouse and he wants to move out or he wants the other person to move out. You went into this because you didn't qualify to buy a home on your own. So how are you going to buy out the other person right now?"

Similar to a married couple or couple buying a home, you can co-own a home as joint tenants where each person has an interest in the investment. If one owner passes away their share goes to the other owner. 

The other option is referred to as a tenants-in-common arrangement where each tenant owns a portion of the property, which becomes part of their estate when they die. 

As for credit, Ingratta says there could be a severe impact if a co-mortgage doesn't work out long term.

"It happens all the time. We even see it with spouses, let alone if you're going into it with a stranger …  you're pretty much jumping into bed with a stranger."

Bondy takes issue with the term "strangers," saying the idea is for a mingle where people meet and become friends over time before rushing into anything financial.

"You go into this with your eyes wide open. You're going to have independent legal advice for both of you. You're going to have a contract in place with the shotgun clause. So if something goes wrong, one can buy out the other or they have to sell the property."