With house prices rising, it can difficult to afford a home on your own. You and a friend might be in the same situation and feel that if you pool your resources, you can invest in a home instead of throwing your money away by paying rent. What all parties have to realize is that this is a business partnership and should be treated as such.
What is involved with Buying a House With a Friend
Before you buy, it is important to look at the big picture and answer these questions:
Are my friends in a stable financial situation? Can they afford to split mortgage payments, utilities and come up with their share of a down payment? Ask them straight out, to avoid any issues in the future.
Do we share the same values? Are you both neat freaks? Couch potatoes? This can lead to tension as unlike a traditional business you are living with each other. People are used to doing things a certain way, are you ready to compromise?
Does everyone agree that this is an investment? Eventually, people’s lives change, they meet someone, relocate for a job. Have you talked about what will happen to the property when one person inevitably needs to sell their share?
Now that you have decided that this deal is going to work, you have to look at getting a mortgage. Is everyone involved going to be listed on the mortgage? All parties will have their credit ratings looked at and generally the person with the lowest credit rating will set the bar as to what a mortgage will be approved for.
After all of these questions have been answered and you have decided to go forward it is recommended that you find a lawyer. Once again, treat this investment as a business arrangement. Sit down with legal council and have a written agreement compiled that includes things such as:
Who will cover the down payment, property taxes, bills, and repairs when they are needed.
What will happen to the home if one of the owners is killed or incapacitated.
When can someone sell or leave the partnership? Do they need to give notice? Can the other partners buy out their share?
Sitting down with a lawyer will make sure that everyone fully understands how situations will be handled as they come up.
The last thing you may want to talk to your new business partner about are the house rules. Set out guidelines regarding pets, parties, noise and guests.
Purchasing a home with a friend can be an excellent way to start building your equity. As long as all of the people involved have been upfront with each other, there should be no surprises along the way to jeopardize the partnership. Let us help you when it is time to apply for that mortgage. We are here to answer any other questions that you may have when planning on buying a home with friends.
Many people may believe getting a mortgage while self-employed is difficult or even impossible. The truth is, it’s not! The mortgage approval process for a self-employed individual can be very easy.
If you are self-employed, do you:
Have good credit?
Have access to a down payment (10%)?
Have difficulty proving your income using the traditional methods, or don’t declare enough income?
If you’re missing one of these three criteria, we recommend reading further or scheduling an appointment with Devin or Wes at Your Mortgage Link to talk about how we can work together to help you achieve home ownership.
There are many rumors circulating the wrong idea about self-employed programs being offered. Here are a few statements which lack information:
“You must be self-employed for a minimum of two years before being considered for a mortgage”
If you’ve been in the same line of work for more than 2 years, regardless of if you were self-employed in the past or not, you may qualify for a mortgage. For example, if you were working for Company “A” for 3 years as a salaried electrician and decide to become a self-employed electrician, you have 3 years experience in the field.
“You can’t get a mortgage if you declare very little income”
False, even though this statement seems to make sense. If you declare very little income or if you declare decent income but it’s insufficient to support your home’s financing, there is still hope. The traditional way to qualify a self-employed individual is by using an average income from the last two years in business. As mortgage associates, we have access to a program called “Stated Income”.
This program allows mortgage associates to use a reasonable income to qualify a self-employed worker, even if this income is significantly higher than what you’ve declared last year.
For example: If you are a hair dresser and the average income for a local hair dresser in Saskatoon is $32,000 per year, your stated income can be $32,000 even if you’ve only declared $20,000 last year.
This program is subject to special guidelines:
The income presented must be reasonable compared to the industry. Using the example of the hair dresser above an income of $100,000 would be very unlikely and therefore, the application could be declined, or supporting documents would need to be presented.
You must provide proof that you don’t owe any income tax to the Canadian Revenue Agency. This can be done by providing your most recent NOA (Notice of Assessment) or a signed affidavit.
As Mortgage Associates, we deal with many different people in various financial situations. If you are a self-employed worker, there are options offered to obtain a mortgage. Just keep in mind that a great credit and access to a down payment are crucial for these programs to work.
When it comes to deciding how often you’d like to make your regular mortgage payments, you can choose which mortgage payment frequency option will best benefit you. You have the option to synchronize your mortgage payments with your pay schedule. In Canada, you can choose from five different mortgage payment options: monthly, bi-weekly, accelerated bi-weekly, or accelerated weekly. Since most employees get paid bi-weekly, this schedule option is the most popular. Some payment frequencies actually accelerate your mortgage repayment allowing you to reduce the total amount of interest you pay over the life of your mortgage. Choosing an accelerated payment also gets you out of mortgage debt years sooner.
What Are Your Options?
Monthly Mortgage Payment A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month (i.e. on the 1st). With a monthly mortgage payment, you make 12 payments per year.
Bi-weekly Mortgage Payment A bi-weekly mortgage payment is when your monthly mortgage payment is multiplied by 12 months and divided by the 26 pay periods in a year. With a bi-weekly mortgage payment, you make 26 payments per year.
Accelerated Bi-weekly Mortgage Payment An accelerated bi-weekly mortgage payment is when your monthly mortgage payment is divided by two and the amount is withdrawn from your bank account every two weeks. With an accelerated bi-weekly mortgage payment, you still make 26 payments per year but the payment amount is slightly more than a regular bi-weekly mortgage payment.
Weekly Mortgage Payment A weekly mortgage payment is when your monthly mortgage payment is multiplied by 12 months and divided by the 52 weeks in a year. With a weekly mortgage payment, you make 52 payments per year.
Accelerated Weekly Mortgage Payment An accelerated weekly mortgage payment is when your monthly mortgage payment is divided by four and the amount is withdrawn from your bank account every week. With an accelerated weekly mortgage payment, you still make 52 payments per year but the payment amount is slightly more than a regular weekly mortgage payment.
The Benefit of Accelerated Payments The one major difference between regular and accelerated payments is how the payment is calculated. With an accelerated payment option, you end up making roughly one extra payment a year. It’ll cost you a little more on a monthly basis, but will save you thousands in interest and help you pay off your mortgage even sooner.
If you have any questions regarding this topic, please give us a all today at (306) 244-7755 or contact us today!
Moving into a smaller space does have its benefits, and there are a variety of reasons for downsizing your home, even if you’re not retiring. Are you:
An empty-nester and no longer need a large home?
Tired of the up-keep of a large house, both inside and out?
Wanting to reduce your living expenses?
Ready to put your energies in creative projects, not housework?
Even though downsizing usually means leaving a home full of memories, a familiar neighborhood, and friends, it also helps you de-clutter and free up your time by spending less time cleaning and maintaining your home, and having more time for other things.
Another great benefit – smaller homes are less expensive to purchase, and less expensive to keep (mortgage, insurance, taxes, heating, cooling, electricity, etc.). There is also a wider market to sell a smaller, reasonably priced house to a larger percentage of the population than a more expensize, less affordable one. A great opportunity for those looking to build their equity and not yet ready to buy into a large home.
Looking to Move Out of the Renting Lifestyle?
If you are still living as a property renter and are thinking of purchasing your first home, one thing to take into consideration is the space you will actually need and how much you’ll be able to afford.
Some things to start asking yourself before deciding on the type of property you want to buy:
Do you have a growing family and require the space for play and sleep?
How long do you plan on living in your first home? 3 years? 5 years? Or are you looking for that forever home? Maybe you only need a starter home right now and don’t want the hassle of cleaning the extra space you are not using.
Are you looking for a place with a yard to finally move out of your condominium suite? Even if you don’t have a family to accommodate in order to buy a home, owning your own living space can be very rewarding, especially when you have your own yard to entertain friends and family.
Will you be able to afford the maintenance of your new home? As a home owner, after all, you essentially are your own landlord. A pipe bursts in the middle of the night? Guess who’ll be up fixing it or calling (and paying) the plumber? (Hint: you.)
Whether you are buying a home to fit your growing family, or are looking to purchase something smaller to fit your own needs, chances are, you’ll need a mortgage.