How Co-Buying a Home Can Make Homeownership More Affordable

If you’ve been thinking about buying a house with a friend to save money, you’re not alone. Rocket Mortgage surveyed potential home buyers and found that nearly 60% of renters are open to co-buying a home with friends.  

By sharing expenses and combining financial resources, people who co-buy are able to enter the housing market on a faster timeline and reduce many of the costs associated with owning a home. If you’re struggling to get into the market, here’s why co-buying might be the solution you’ve been searching for

How Co-Ownership Reduces Financial Barriers to Homeownership

If your main obstacle to owning a home is affordability, you’ll have more buying power when you combine your income with someone else’s. Saving tens of thousands of dollars for a down payment can be hard on your own. Combining your income with someone else also allows you to share the down payment and potentially obtain a home faster.

Owning a home comes with a variety of financial responsibilities like mortgage payments, property taxes, repairs, maintenance, and insurance premiums. When you co-buy your home with a friend or family member, everyone can contribute to monthly property expenses as well as household bills. This drastically reduces the cost of homeownership per person.

Hidden Costs are Easier to Manage

Many first-time home buyers underestimate the cost of ongoing and surprise expenses that come with owning a home. Depending on your location, property taxes can cost thousands of dollars every year. In some areas, property taxes rise significantly every year. Sharing expenses makes it easier to handle large jumps in property taxes and other bills that only seem to grow larger.

Rising insurance premiums are another hidden cost of homeownership, as well as maintenance and repairs. When the cost of materials rises, so does the cost of small jobs like fixing a porch or replacing some shingles on your roof. On your own, unexpected repairs to fix plumbing or electrical issues can be devastating, but they become manageable when shared with another person. 

Co-Buying Can Improve Your Housing Options

While the main benefit of co-buying a home is saving money, it can also improve the quality of housing you can afford. When you combine your income with another person’s, you’re more likely to have access to a home in an area with good schools and better amenities. You won’t have to settle for a small house. Instead, a shared budget can give you access to homes with garages, big yards, home offices, and updated features.

You’ll Build Equity Instead of Paying Rent 

If you’re tired of spending money on rent, co-ownership is a great pathway to homeownership. Every mortgage payment you make will contribute toward equity in your home rather than funding your landlord’s equity. Over time, as your home rises in value, it can increase the equity you have available. 

There are Practical Advantages to Co-Living

Living alone has some advantages, but when you live with other people, you can share the cleaning and other household tasks and get more time to yourself. Living with a good friend can make you feel more connected and less isolated, even if you don’t hang out all the time.  

Friends who live together can help each other when needed without having to find a stranger. For example, some friends create arrangements to help each other with childcare, pick up each other’s kids from school, accept deliveries, care for pets, and other things.  

Common Mistakes to Avoid

There are plenty of benefits to buying a house with a friend or family member, but there are also several challenges that can lead to costly mistakes. For instance, don’t assume everyone who wants to share a home has the same goals. Some people don’t even realize they have plans for the future that will clash with buying a home right now. 

It’s critical to establish an agreement before you even attempt to get approved for a mortgage. Everyone needs to agree on things like exit strategies, shared ownership percentages, financial contributions, and dispute resolution processes first. Having everything written down provides a definitive resource for disagreements and reduces the potential for disputes.

Co-Buying is a New Path to Homeownership

For buyers struggling with affordability, buying a house with a friend is a practical alternative to waiting and hoping housing costs will drop. While successful co-buying arrangements require planning and strong communication, sometimes it’s the best way for people to own a home.

Photo by Tierra Mallorca: Unsplash