It can be hard for young people to buy their own homes. Parents and children can own a house together so that the younger generation can buy their first house.
What Is a Co-Owned Home?
A co-owned home is one that’s owned by multiple people, rather than just one person or family unit. In most cases, the people involved in a co-ownership (usually parents and adult children) will each own part of the house according to their percentage of ownership.
For example, if your child owns 60% of the property and you own 40%, your child is responsible for paying about 60% of all expenses incurred by the property while they live there.
For a co-ownership to succeed, it’s strongly recommended that any potential owners have a written agreement in place that outlines how much responsibility each party is going to take on and clearly defines the responsibilities of all parties involved.
Why is co-ownership becoming a trend among parents and adult children?
Here are a few reasons why:
- If mom and dad have been getting by on one income for years in order to retire comfortably, then they’re probably not going to want to spend that money now.
- Adult children might not have enough money for a down payment. It is also that they simply might not be able to take on the monthly mortgage payments alone.
- Perhaps adult children are financially strapped and their parents don’t want to see them struggle anymore.
- Parents have only one home but they have more than one kid. Co-ownership is one way to ensure that all of their children can eventually have their own home.
With all these factors in mind, a co-ownership situation may make sense for everyone involved. Parents get to give money (or get an interest) and the adult child buys his or her first house. The parents get to see their kids succeed as homeowners while still contributing in a significant way.
As a Parent, How Do You Protect Yourself in this Setup?
Parents should make sure that they have clear-cut rules about how this co-ownership arrangement will work. They can all agree on an amount of money that the parents can pay to the adult child for a down payment or toward monthly mortgage payments, but there should be an agreement based on things like:
- What happens if mom and/or dad die? Will their share of the house go to their children? Or will it revert back to the surviving spouse?
- Will this arrangement continue forever? Or will it be for a certain number of years?
- What if the parents want to sell the house at some point? Will they get the first right of refusal on buying it from their children?
If you think about your own situation, you may find that some of these questions are very important and can’t be overlooked. Your family should discuss these issues in detail before any money changes hands.
How to Apply for a Home Loan
If you and your adult children are considering a co-ownership situation, make sure they for the home loan separately from you as a parent.
Mortgages can get complicated, and even the best-laid plans can change along the way. It’s a good idea to review your mortgage carefully with your adult child before any payments are made. If you don’t know enough about mortgages to understand all of them, then get some expert advice before the loan is finalized.
You’ll need to decide whether you want to be on title as owners or tenants in common. Otherwise, all mortgages should work the same way they would for any other home purchase.
What About Other Expenses?
Don’t forget to account for things like property taxes, homeowners insurance, and maintenance expenses. You’ll also want to figure out which parent will be responsible for paying for these costs and sticking to their agreement.
What If There’s a Problem with the House?
Parents should make sure that they have clear rules about what happens if the adult child has to move. In a co-ownership situation, it can be almost like you’re in a marriage – except without all of the drama! Although this kind of arrangement might sound unusual, it can actually work out well for everyone.
Parents and children should pool their resources and use them to buy a home for each of them. It’s a great way to help kids get started with property ownership and it makes sense for parents who don’t have the time or money to do more on their own.
How To Avoid Co-Owning Headaches
There are some legal issues you should consider before buying with your children, too. Discuss the nature of the relationship between parents and children (are they joint tenants or tenants in common?) to make sure that everyone is protected.
Think about how your kids will take care of this house at some point if something happens to you. Consider hiring a lawyer to write up a legal document spelling out what would happen in certain scenarios. You don’t want to leave anything to interpretation, especially when you’re dealing with family members and legalities.
Many parents have the means to help their adult children afford a home of their own, but don’t do it because they want to give them the chance to learn how to be good homeowners and take care of themselves.
You can accomplish this by helping them buy a home that’s “co-owned” between you and all of the children.
In an ideal world, parents would simply buy their kids homes and give them to them when they’re finished paying for it with their own cash or money from another source (like an inheritance). However, most parents just can’t afford to do that with more than one child.
Many people in this situation have found a creative solution: co-ownership. It’s basically the same as buying a home together, except for it involves parents and children — at least two of them!
Whether you and your children are looking for a condominium in Pasig through real estate websites in Philippines, or a house in the city, you can still find a perfect first home.
If you’re thinking about co-ownership with your kids, use this guide to get started. It will help you figure out how to buy a home as co-owners and make the process as smooth as possible.
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