Housing affordability has been declining thanks to rising home prices, high interest rates, and stagnant wages. The cost of living in many areas has reached an all-time high, making homeownership seem out of reach for many Americans.
However, shared homeownership, also known as co-buying, has become a practical workaround. Friends, family, siblings, and carefully vetted partners are pooling their resources to buy a home together. It not only works – it’s favorable.
A Rocket Mortgage survey of house hunters found that nearly 60% of renters are open to co-buying a home with friends. It’s a more desirable alternative to renting out rooms to strangers just to pay the mortgage or staying stuck in a small apartment.
Buying Alone Is Becoming Unrealistic
Currently, home prices are outpacing income growth. The median U.S. home price has increased greatly in the last 10 years, while wages lag far behind. The median home price is now over $400,000, and that’s not feasible for most people. Rising home prices make saving for a substantial down payment a massive obstacle. A traditional 20% down payment on a $400,000 home is $80,000 – an amount that takes many buyers a decade or more to accumulate. Buyers who can make bigger down payments save more money long-term.
Since wages are stagnant, many people are living on credit, which significantly impacts the ability to borrow. Lenders look at debt-to-income ratios to determine how much money someone can borrow. Someone with student loans, car payments, and credit card debt may struggle to get a big enough loan. Co-buying is a great way to avoid these issues.
What Shared Homeownership Looks Like
Shared homeownership involves more than just multiple people purchasing a home together. It also involves working out ownership percentages, tenancy agreements, and exit plans. For example, if the owners choose joint tenancy, they’ll have equal ownership and shared rights. If they choose tenancy in common, they’ll divide ownership percentages unequally.
While co-ownership solves the financial difficulties of buying a home alone, it only works when there’s a strong agreement in place that documents expectations and responsibilities. It’s critical to have a solid agreement that outlines how equity is split and what happens if someone wants out.
How co-buying expands homebuyers’ budgets
When multiple incomes are involved, lenders sometimes approve larger loans. Borrowers with higher combined incomes also tend to qualify for better interest rates. And sharing the down payment makes it easier to make the down payment. For instance, when there are two buyers, each person only needs to contribute $40,000 to make an $80,000 down payment. This makes it possible to buy a home faster.
Another benefit of co-buying is having access to better neighborhoods and nicer homes. Instead of lowering their standards and choosing the best option out of what they can afford, co-buyers have a choice. Housing affordability automatically increases. They can look for a home in safer neighborhoods with better schools and strong long-term appreciation.
Costs Are Split Beyond the Mortgage
Getting a cheaper mortgage by co-buying isn’t the only source of savings. Since owning a home comes with a long list of financial responsibilities and ongoing expenses, co-buying splits that load. For example, sharing homeownership expenses makes maintenance and repairs easier, lowers each person’s property tax burden, and living together reduces utility expenses. Sharing these costs improves affordability and long-term stability.
Some co-buyers choose to rent out spare rooms, but they can choose better tenants when that monthly income isn’t required to pay the mortgage.
Partnerships Can Mitigate Risk
Although there are certain risks that arise from shared ownership, it also reduces some risks. Rather than one person carrying all the risk, it’s spread out across multiple people. For example, if one co-owner is in financial trouble, the other people can temporarily cover expenses. This reduces the risk of default that could normally lead to foreclosure.
There Are Social and Lifestyle Benefits
Another side to co-buying a home is having built-in community. Living with people you trust can reduce feelings of isolation and create a stronger sense of connection. And when tasks like yardwork and cleaning are shared, it reduces the risk of burnout.
For anyone who works from home, co-buying makes it easy to set up a home office or business in the garage and skip the overhead of renting an external office.
Co-Buying a Home Is a Smart Choice
Shared homeownership is an excellent way to beat the housing affordability crisis that puts solo ownership out of reach. It requires careful planning, strong communication, and trusted partners, but the benefits are worth the effort.
