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The pros and cons of mortgage splitting by multiple families

On Behalf of | May 28, 2024 | Residential Real Estate |

The residential real estate market in Florida has become very competitive and expensive. Many families that would like to own their own homes may find it cost-prohibitive to acquire a single-family home. Even with two working adults in the household, mortgage payments may be too high to manage.

One of the solutions creative buyers have started utilizing is cooperatively purchasing residential property with another family. The idea of co-buying or mortgage splitting has become quite popular, especially when looking at duplexes and other similar properties.

What are the pros and cons of co-buying or splitting a mortgage with another household?

The benefits of buying cooperatively

There are many perks to working with another family to purchase residential real estate jointly. The diversification of financial responsibilities and income is very helpful. People don’t have to worry about defaulting on their mortgage if one spouse suddenly loses their job. Additionally, there is another family to assist with the maintenance, upgrades and repairs necessary at the property. Co-buying can be a cost-effective solution for those who find rent to be too expensive but who cannot afford payments on a mortgage without assistance. Co-buying can make homeownership accessible and can reduce what people pay monthly for their housing costs.

The drawbacks of splitting a mortgage

There are multiple challenges to mortgage splitting or co-buying. One of those challenges is the difficulty in acquiring financing. It can be much more difficult to find a lender when two households share an interest in the same real property. Even when buyers have a lender that agrees to work with them, they likely need to negotiate very extensive contracts for their own protection. Those in a co-buying arrangement need to have very clear written agreements explaining exactly how they break down financial and practical responsibility for the shared residential property.

They need to have rules in place for one family defaulting on their obligations as well. The failure to thoroughly address those issues might lead to disputes that can cause stressful living arrangements or financial losses for those attempting to acquire real property with a second family. Finally, the potential lack of privacy and the possibility of the relationship between the two families souring over time can be a drawback to a co-buying scenario. People end up trapped in close quarters with other individuals, possibly for years, after buying real estate together.

Those who realistically evaluate different solutions for the acquisition of residential real property can choose the best options available given their circumstances. Co-buying or mortgage splitting can be a reasonable solution for some families, although it isn’t the best situation for everyone.