Co-owning a house or vehicle: what to consider

Many people aim to own a home or car. But it can be a challenging goal to achieve. 

In Canada, the average price of a home across the country is $662,437. And while (most) cars are significantly cheaper, new vehicles have become more expensive because of supply chain issues and changing consumer trends, like the popularity of larger vehicles.

Co-ownership can help lessen the financial load associated with owning a home or a car. However, buying a home or vehicle with a partner comes with its own unique complications that you need to be aware of before signing the dotted line. But if you follow these guidelines, you’ll have greater chances of successfully achieving your goals with a partner by your side.

Be honest about your financial history and driving record

Your eligibility for a mortgage will be determined by your credit score, income, debts, and assets, among other factors. And when purchasing a car insurance policy or taking out a loan on a vehicle, both your financial history and your driving record will be considered. When two or more people are applying, each applicant’s information is accounted for in the application. If you have relatively similar details, you can potentially save by sharing the cost of a fair auto insurance premium. But a bad driver can hike up your rate.

It could be similarly challenging for co-owners to be approved for a mortgage together, depending on each individual’s personal circumstances. For example, if one person is self-employed, overall income is harder to prove. Another hiccup could be credit scores. One bad credit score could potentially torpedo a mortgage application. If your potential co-owner has had to declare bankruptcy in the past, that would also limit the kind of loans you could get.

Being fully transparent with your partner about your financial history and driving record will make it easier to determine whether co-ownership is a good fit. If you’re not on the same page, one person may be weighed down by the other.

Be clear about responsibilities and primary ownership of asset

Typically, choosing to make a big purchase with someone means that you have a close relationship — say, married or in a common-law relationship. Sometimes even friends who cohabitate choose to purchase a home or car together to help alleviate the costs. 

Hopefully, that relationship will last a long time. But even the best marriages or friendships can take a rocky turn over fights about finances. That’s why it’s important to be clear about who is responsible for things like who will pay for what portion of the mortgage, or even who is responsible for maintenance of the home or vehicle. 

What rights you have under law depend on the province you live in, so it’s worth understanding that before you consider buying a home. However, you can enter into a legal agreement with your prospective co-owner that outlines responsibilities and payments, and an exit strategy (meaning, who would get the asset in the event of a breakdown of the relationship) that goes beyond what is enforceable in your province’s property ownership law. 

Be supportive if you choose to co-own 

There may be situations where it makes more sense for one person to put their name on the insurance policy or mortgage. If you have traffic tickets on your driving record and very poor credit, for example, you might get a better insurance rate if your partner buys the car and lists you as a secondary driver. (Just be aware that you can only do this if you truly do not drive the car more than 50 per cent of the time — doing otherwise is insurance fraud.) Doing it this way certainly requires a lot of trust, and you may want to consider a legal agreement to be clear about what your responsibilities are. But it can help support one partner who may not be as financially well off as the other. 

It always helps for both parties to compare car insurance rates and mortgage rates to see what your payments would look like individually first, and allow that to determine whether co-owning is right for you.