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Sharing Is Caring: How to Handle Joint Ownership of a Home

Teamwork can indeed make the dream work, particularly if the dream is to own a home in a more affluent area than you could afford on your own. However, if you want the dream to last, you must make sure you and your partner(s) know how to handle joint ownership of a home. While you’ll pay less for everything than you would otherwise, including lower out-of-pocket expenditures such as homeowners insurance rates, each of you will be taking on responsibility for the full value of the house and all debts associated with it.

Know Sharing Means Exactly What It Implies

Yes, there is an agreement between you to share the financial liabilities in proportion to your share of ownership. However, in the eyes of the financial institutions backing you, each of you is liable for the full value of the home, insurance and other obligations. If something happens to one of you, debtors will look to the rest of you to cover the entire thing. In other words, if you split a $500,000 house with someone, you’ll effectively have a mortgage for $500,000 in your name, because if your partner defaults, it will fall upon you to service the entire debt.

Decide Upon the Type of Ownership

The two most common methods of holding title in joint ownership situations are tenants in common and joint tenancy.

Tenants in common (TIC) enjoy equal ownership of the home, which is financed with a single mortgage to secure the entire property. However, there is no right of survivorship among partners, unless it is specifically stipulated in your joint ownership agreement. Otherwise, the dead partner’s share goes to their heir(s).

Joint tenancy (JT) includes right of survivorship, so if one of the partners dies, their share automatically goes to the surviving partner. However, all of the partners must have bought in together and have equally divided interests, which are spelled out in the same title documentation.

A Written Contract Is Essential

At minimum, your written agreement should cover type of ownership, privacy rights, payment of ongoing expenses, maintenance costs and sharing of resources. You should also specify how you will handle mortgage payments and agree upon an exit plan should the relationship sour. If you decide to move in the future, can you rent your part of the home? If so, what are the parameters within which it can be done? What if you decide to refinance, or one of the partners hits a financial problem and has to default? Consult an attorney to draft this document to ensure the legality of your agreement.

As you can see, while there are many advantages to this strategy, you must be careful to handle joint ownership of a home in a way that protects and benefits everyone involved in case of adversity.

It’s also important to get a handle on the overall budget of running the house—including homeowners insurance rates. CoverHound can definitely help you there; try it today.

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