Questions from real people, just like you!
So my parents and I are tossing the Idea around of purchasing a whole duplex together, but are a little unsure of some of the details.
When it comes to a split mortgage, what is the required minimum down payment? I know in Alberta Canada where we're from, it would be a 5% minimum for me as a first time buyer, but they would required 20% as this would be there second home, so am I just lumped in with them?
If so, would it be possible to make the small down payment under my name via a gift from them and have them purchase half from me directly?
How is the mortgage rate calculated?
With my salary being lower, and with less credit history, would they just take our average, combine it, or just take the highest person into account?
Before anyone comes in and hassles me about a joint mortgage or minimum down payment and whatnot, please keep this all hypothetical. My mom just tossed the idea at me and it got me really curious about these factors. Thanks for the help!
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| Like, what if I don't like their couch? |
If so, would it be possible to make the small down payment under my name via a gift from them and have them purchase half from me directly?
How is the mortgage rate calculated?
With my salary being lower, and with less credit history, would they just take our average, combine it, or just take the highest person into account?
Before anyone comes in and hassles me about a joint mortgage or minimum down payment and whatnot, please keep this all hypothetical. My mom just tossed the idea at me and it got me really curious about these factors. Thanks for the help!
Ok, let's break down this scenario and answer the questions piece by piece.
No matter if a mortgage is split, shared, lumped, thrown at a wall and eaten by the dog the required minimum down payment is 5% of the sale price. To protect lenders against foreclosures or people just walking away from a property, that 5% shows that the property owners have some vested interest in keeping the house.
Yet, this is a duplex - so legally a duplex has 2 different titles (call'm right side and left side). Each side would have a separate deed. In your scenario, it sounds as if your parents are trying to purchase two houses and want you to share the risk in that purchase. Or, they could want you to start being a homeowner and so are planning on you living/renting in one side of the duplex while they live in the other. You should clarify what they are thinking long-term with the other side of the duplex.
Being a parent I can see the benefits of what they may be trying to do; they are starting you on the road to being a responsible home-owning adult, yet keeping you close enough to watch over. It's a lifestyle choice you need to make.
First-time home buyers receive a tax credit but have to plan on using the home as their primary residence within the year. You can find more information here.
They can gift you the 5% down payment, no problem. A simple gift letter stating so would do it. They must realize and state that this is a gift, not a loan. But they also have to have enough equity to have another down payment for the other side of the duplex.
The mortgage rate is calculated by basically taking your overall expenses and dividing it by your monthly income. You need to have a certain amount of disposable income that indicates you can afford the mortgage payments. A good rule of thumb is no more than 40% of your monthly income go to debt, leaving you 60% to cover the mortgage.
Lastly, if you decide to become an 'investor', meaning your parents add your name and income (assuming you are of legal age) to their mortgage application then the lender will review the strength of the application and then offer you a mortgage rate - that is why I suggest a broker - there are over 50 lenders that I have access to, all have their own rules and different guidelines and rates that a typical Big 6 bank doesn't offer.
My advice?
Ask more questions. I don't know your age, your lifestyle, your culture, your future plans. Consider the location and if you want your parents living right beside you. While they might mow your lawn and take out the garbage for you, they might (gasp) expect you to do it!
Also the recent drop in gas prices (as of Jan 2015) and Alberta's reliance on the industry doesn't bode well for real estate prices so you may want to wait a bit to see what happens.
As always, good luck. Take your time and be informed when you decide to become a home-owner. It's a large responsibility that can wait until you are truly ready.
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| If it's in a blog, it must be legit. |
No matter if a mortgage is split, shared, lumped, thrown at a wall and eaten by the dog the required minimum down payment is 5% of the sale price. To protect lenders against foreclosures or people just walking away from a property, that 5% shows that the property owners have some vested interest in keeping the house.
Yet, this is a duplex - so legally a duplex has 2 different titles (call'm right side and left side). Each side would have a separate deed. In your scenario, it sounds as if your parents are trying to purchase two houses and want you to share the risk in that purchase. Or, they could want you to start being a homeowner and so are planning on you living/renting in one side of the duplex while they live in the other. You should clarify what they are thinking long-term with the other side of the duplex.
Being a parent I can see the benefits of what they may be trying to do; they are starting you on the road to being a responsible home-owning adult, yet keeping you close enough to watch over. It's a lifestyle choice you need to make.
 |
| Will they like your choice of friends and/or roommates? |
First-time home buyers receive a tax credit but have to plan on using the home as their primary residence within the year. You can find more information here.
They can gift you the 5% down payment, no problem. A simple gift letter stating so would do it. They must realize and state that this is a gift, not a loan. But they also have to have enough equity to have another down payment for the other side of the duplex.
The mortgage rate is calculated by basically taking your overall expenses and dividing it by your monthly income. You need to have a certain amount of disposable income that indicates you can afford the mortgage payments. A good rule of thumb is no more than 40% of your monthly income go to debt, leaving you 60% to cover the mortgage.
Lastly, if you decide to become an 'investor', meaning your parents add your name and income (assuming you are of legal age) to their mortgage application then the lender will review the strength of the application and then offer you a mortgage rate - that is why I suggest a broker - there are over 50 lenders that I have access to, all have their own rules and different guidelines and rates that a typical Big 6 bank doesn't offer.
My advice?
Ask more questions. I don't know your age, your lifestyle, your culture, your future plans. Consider the location and if you want your parents living right beside you. While they might mow your lawn and take out the garbage for you, they might (gasp) expect you to do it!
Also the recent drop in gas prices (as of Jan 2015) and Alberta's reliance on the industry doesn't bode well for real estate prices so you may want to wait a bit to see what happens.
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| On the plus side, the drive to do laundry would be short |
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