Buying a House With a Friend or Family Member in Ontario

Pooling money with a friend, sibling or parent can make a home affordable. It also ties your finances and your plans to someone else's, and the arrangement has to work when life changes: a job move, a new partner, a death or a falling out.

This article walks through the main risks of sharing title and a mortgage, and what a written co-ownership agreement should cover, especially if one person wants out.

Sharing a home means sharing risk

When several people are on title and on the mortgage, your finances are linked. How the mortgage obligation works if one owner stops paying depends on the terms of your mortgage, so ask your lender and lawyer to explain it before you sign. A missed payment by one person can become a problem for all.

Also think about what happens if one of you wants to sell, buy out the other, or cannot afford the carrying costs. These questions are far easier to answer before you buy than during a dispute.

Choose how you hold title

Co-owners hold title as joint tenants or tenants-in-common. On the death of a joint tenant, the surviving co-owners inherit the deceased's share. On the death of a tenant-in-common, the share becomes part of the deceased's estate.

For friends or relatives who contribute different amounts, tenants-in-common is often the better fit, since co-owners may agree to unequal shares. Joint tenancy suits people who want the survivor to take the whole home, but it may not match what each person wants for their own family.

Money, gifts and family sales

Family help often comes as a gift toward the down payment. CMHC lists a non-repayable financial gift from a relative among traditional down payment sources. Put in writing that it is a gift, not a loan, so nobody disputes it later.

• Land transfer tax is charged on the value of the consideration. It is not limited to the price in the agreement and can include the value of any liability assumed, such as a mortgage, and any benefit conferred.
• If a relative sells you a property for less than fair market value, the Income Tax Act can deem the seller to have received proceeds equal to fair market value.
• Tax outcomes for family deals vary, so speak with a lawyer or accountant before agreeing on a price.

What a co-ownership agreement should cover

If you are not married, there is no automatic set of rules dividing the home between you. Common-law partners are not required to divide property under Ontario's equalization rules and may have to go to court to recover a contribution. How the law treats friends or relatives who buy together depends on your situation, so a written agreement and advice from a lawyer are worth arranging before you buy.

• Each person's share and how it was calculated, including the down payment and later contributions.
• Who pays the mortgage, property tax, insurance, utilities and repairs, and what happens if someone misses a payment.
• Who lives in the home and whether anyone may rent a room.
• How a buy-out works: valuation method, timing and financing.
• What happens if one owner wants to sell, and how long the others have to respond.
• What happens on death, including how it fits with wills and the way title is held.
• How disputes will be handled before anyone goes to court.

A cohabitation agreement can set property terms for common-law partners. Whoever you buy with, a lawyer can draft terms that fit your arrangement.

What to do next

• Talk openly about money, plans for the home and how long you expect to stay.
• Meet your mortgage lender together and ask how each borrower is responsible.
• Ask your lawyer to review the title options and draft a co-ownership agreement before closing.
• Update your wills to match the title you choose.

Signing the agreement before you close, while everyone is on good terms, is much easier than negotiating it after a disagreement.

Frequently asked questions