3 Great Questions for a Mortgage Broker...

3 Great Questions for Me, a certified Mortgage Broker


1) Can I ask you a question?

2) Is there anything interesting about being a mortgage broker?

3) I'm planning on buying a house with my BFF but we don't want to get married. Is that possible? What happens if we split, I mean, they decide to move out and get their own place?

Platonic BFF's since 1969

Answers 

1) Sure, anytime.

2) Oh my god, yes. There's passion, danger, intrigue, cool gadg- wait, that's James Bond. Well... we are nothing like James Bond. Unless James Bond once pretended to be a mortgage broker but it was cut out of the final script. No, don't ask me which movie. That's what makes it interesting.

3) Well, you just asked 2 questions, but I will let it slide. You want to buy a home with your BFF you say? 

 

Platonic BFF's in denial since 1994

You could jointly purchase a home with any BFF or even a family member that meets a lender's requirements. There isn't much difference than if you were trying to qualify alone. You and your chosen sibling and/or soul mate would both be on the title and the mortgage.

However as to the second part of the question, you are talking basically of a divorce, be it house ownership or common-law, the rules are pretty much the same - perhaps circumstances do change and your BFF decides to move out after finding you have a tendency to never flush the toilet or keep the freezer so cold that the ice cream freezes to the point the spoon bends trying to scoop some out. Yes, I'm talking to you, Mrs. Mortgage Broker - stop playing with the thermostat. 
No matter the circumstances, your mortgage partner decides they want to be 'removed' from the title and want you to pony up their share of the equity in the home. You can either sell the house, splitting the profit equally or you can try to buy the house outright. Most lenders will require you to re-qualify to carry the new mortgage. Some may require you to acquire a complete new mortgage. Others may force you to incur a penalty or a change in rate. Your friendly mortgage broker will find all that out for you. That's what we do, outside of the secret agent stuff.

So, how about I get a renter to replace my no longer BFF to help pay the mortgage?

Technically, unless you have a separate suite, you can't claim rental income as part of your debt servicing with most lenders. You need to qualify on your own income and expenses. Of course, once you own a house, what you choose to do with your extra bedrooms is up to you.

Keep in mind that in the ever-increasing costs of real estate, many first-time home buyers are needing extra help from their parents in qualifying. Lenders call these generous and trusting people 'guarantors'. Technically anyone could be a guarantor if they meet the lender's requirements. The drawback of being a guarantor in a mortgage is that they share in the risk of the mortgage if it ever goes into default but would have no stake in ownership. Once you are on sound enough financial footing you can have your guarantor(s) removed.

Are there any tax implications of my former BFF moving out and me buying out their share?

If it's their primary residence, as it is with most marriages or just 'friends with benefits' scenario, there should be no tax penalty However, this should be best checked with your accountant and/or lawyer. I do mortgages, not taxes. 

Pray that your former BFF isn't Bruce Banner