Important Considerations When Co-Owning a House with Someone

With home prices soaring, teaming up with someone to buy a home is becoming popular. There are many benefits to finding someone to co-own a house with you. However, it’s important to communicate, plan, and understand the legal and financial considerations before going into joint homeownership. Here’s what you need to know!

Considerations Before Co-Owning a Home

Sharing a home also means making joint decisions with long term effects. To make sure it’s a positive experience, here are some key questions to ask yourself and your potential co-owner(s): 

  • How will you split finances? Decide how you’ll divide the down payment, mortgage, property taxes, insurance, and maintenance costs. Will you have a joint account for expenses? What happens if one person can’t pay their share?
  • What’s the exit strategy? If one of you want to sell, will there be a buy-out option for the other? How will you determine the home’s value?
  • What happens in case of illness or death? How will the property be handled if one co-owner passes away or becomes unable to manage their affairs? Does the ownership structure align with everyone’s estate plans?
  • How will you handle household responsibilities? Whether it’s a primary residence, vacation home, or rental, be clear about how you’ll divide maintenance, chores, and decisions about the property.
  • How will you resolve disagreements? It’s helpful to have a process in place for conflict resolution. This can be achieved through mediation, arbitration, or another method.

The best way to protect everyone involved is by putting everything in writing. While the property deed names the co-owners, a co-ownership agreement goes further. A well-drafted agreement can prevent future conflicts and safeguard your investment, especially your home.

Choosing the Right Co-Ownership Structure

Different home co-ownership structures impact how the property is shared. They also affect what happens in case of a sale or an owner’s passing. Here are the two most common options:

  • Joint Tenancy with Rights of Survivorship: Each co-owner has an equal share. If one owner passes away, their share automatically goes to the surviving owner(s). This is common among married couples and close family members.
  • Tenancy in Common: Each co-owner can own a different percentage of the property. Their share can be passed down to heirs instead of automatically transferring to the other owners. This setup offers more flexibility, especially for friends or non-related co-owners.

No matter which home co-ownership structure is decided upon, it is important to define roles each person’s rights and responsibilities for the home ahead of time. Remember, even with detailed planning, conflicts can always arise. The key is to have a plan in place for disagreements to prevent small issues from turning into major disputes. 

Estate Planning for Co-Owners 

Owning a home together is a major financial commitment, so it is key to factor it into your estate plan. Here are some important things to consider:

  • Who inherits your share? If you own the home as tenants in common, make sure your will specifies who will inherit your portion.
  • Trusts for Smoother Transfers: Placing your share in a trust can help avoid probate. This simplifies the transfer process for your heirs.
  • Life Insurance Protection: A life insurance policy can provide financial security to your co-owner. It can cover mortgage payments or buyout costs if something happens to you.
  • Regular Updates: Keep your estate plan up to date, especially if your co-ownership agreement or life circumstances change.

Buying a home with someone other than a spouse can be a great way to achieve homeownership. However, it requires careful planning and the right legal protections. Open communication, a solid co-ownership agreement, and proper estate planning can help you and your co-owner enjoy the benefits while avoiding potential pitfalls.

If you’re considering co-owning a home, we’re here to help. Contact our office today to make sure you’re set up for success with the right agreements, protections, and peace of mind!