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Team Mortgages, Vancity Style

Co-ownership-mortgageSometimes it takes a team effort to afford a mortgage.

That’s especially true in the Vancouvers and Torontos of the world, where you need to be in the top tax bracket to afford a detached home solo. This is probably why Vancity, the nation’s largest credit union, has been getting press lately on its Mixer Mortgage, even though it launched the product in 2006.

The Mixer Mortgage is designed to help one or more roommates, co-workers, friends or family members buy a home together. It’s not a new concept. Vancity just puts a different spin on it, and that spin includes useful guidance.

Vancity has promoted co-ownership probably more than any other lender. One way it adds value to the process is with this practical checklist: Co-Ownership Considerations

Anyone who isn’t hitched to their co-applicant by law or common-law should use this checklist and get a legal co-ownership agreement. If you don’t and your co-habitant stops paying the mortgage, you’re up the creek (you may be up the creek anyway but an agreement helps). Plan on $250 to $1,000 for a lawyer to draw it up, says Vancity.

Lenders aren’t the most understanding bunch when it comes to delinquency, and they don’t accept half of a mortgage payment. “As with any mortgage, the payment is the full and equal responsibility of the co-owners,” notes Vancity Mortgage Development Manager Colin Lawrence. “For this reason, we recommend a well-thought-out co-ownership agreement be drafted with the assistance of a lawyer — to ensure all situations are well accounted for.”

VancityIn terms of risk to the lender, this type of mortgage has the same or lower risk profile as a typical owner-occupied mortgage, Lawrence suggests. “We are not aware of any defaults that have occurred as a result of our Mixer Mortgage.”

Other benefits of this product:

  • The mortgage can be split into multiple parts — useful when one owner wants a different type of mortgage than the other (e.g., one can have a fixed rate and one can have variable).
    • Tip: If you split the mortgage into two or more types, and it’s a closed mortgage, try to pick the same term for each mortgage type (e.g., both 5-year, both 3-year, etc.). That way you’re not tied to the lender when the shorter term renews. In that case your rate negotiating power decreases because the lender knows you can’t leave and break the other portion without a penalty.
  • Payments can be made separately by each borrower.
  • Payments can be made equal to each owner’s respective share (e.g., the payment for a 1/3 owner could equal 1/3 of the total payment due).
  • The Mixer Mortgage qualifies for Vancity’s best available rates.
  • Vancity can process separate applications, one for each owner (for those who like to keep their personal details personal).
  • Customers can use their broker to obtain this mortgage or go direct to Vancity.

Rob McLister, CMT