Real Estate

Mortgage Splitting and Credit History changes

  • Last Updated:
  • Jul 17th, 2020 10:09 pm
[OP]
Newbie
Jun 9, 2019
28 posts
8 upvotes

Mortgage Splitting and Credit History changes

Hi we are three friends planning to buy an investment property in Ontario. The mortgage would be around 400000. One person has around 100k salary, the other two has 50k each. We will be putting in 10% down, it is a second property for all of us.


Would the mortgage liability be split among the three equally or would it be some kind of ratio based on income. Also on each of our credit history would the whole mortgage amount show up or will only each person's share show up.


The property is a student/rental property and will generate income, can a first time home buyer be a co-applicant without losing first time benefits and also not having a dent on their affordability when they decide to buy their own home?


Thanks..
9 replies
Deal Addict
Jan 1, 2017
1807 posts
1819 upvotes
Reddeals77 wrote: Hi we are three friends planning to buy an investment property in Ontario. The mortgage would be around 400000. One person has around 100k salary, the other two has 50k each. We will be putting in 10% down, it is a second property for all of us.


Would the mortgage liability be split among the three equally or would it be some kind of ratio based on income. Also on each of our credit history would the whole mortgage amount show up or will only each person's share show up.


The property is a student/rental property and will generate income, can a first time home buyer be a co-applicant without losing first time benefits and also not having a dent on their affordability when they decide to buy their own home?


Thanks..
I hope you draft and sign a contract with your friends. What happens when one of you needs money and wants to sell the house but the other two don’t? End of friendship and court battles... seen too many horror stories like this one in these forums.

That contract also better state how much equity each has in the house and how much mortgage payments each of you will be making. E.g. what will happen if the house is vacant for a few months and one of you doesn’t want to make his share of the mortgage payments because maybe he lost his job..: does he still has the same equity or less equity in the house now?
[OP]
Newbie
Jun 9, 2019
28 posts
8 upvotes
White Up Pointing Backhand Indexha..not sure ..personally we have 300 off car finance coming up in next month....equity loc has been opened and all credit cards are paid off, down payment is there in the loc, we are retaining tenants..so mortgage will self pay I guess...and mortgage for the second is almost approved...wanted to know the after effects...
Deal Fanatic
Jan 15, 2017
5132 posts
5084 upvotes
Ottawa
You will need minimum 20% down to purchase investment property.
[OP]
Newbie
Jun 9, 2019
28 posts
8 upvotes
Thanks..some how we are circumventing that...we are also paying the mortgage agent a %
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9952 upvotes
Edmonton
Reddeals77 wrote: Thanks..some how we are circumventing that...we are also paying the mortgage agent a %
You need to get the details of how this will affect each of you from your mortgage broker/agent. They’ll know how things are set up, so they’ll know how it will affect each of you.

I’ll second the motion that this is a really bad idea. From your other post, you’re treading water financially. If this bites you in the ass, your resources seem to be limited to recover. There’s also many fingers in the pie, which increases the odds that a split is in the future, and it may not be amicable. Hope for the best, plan for the worst, and maybe you’ll be lucky and get something in between. But the contract between owners should be your first priority.

C
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9952 upvotes
Edmonton
Reddeals77 wrote: Thanks..some how we are circumventing that...we are also paying the mortgage agent a %
And you’re most likely “circumventing” that by getting a mortgage through either a low tier lender (aka not a big 5 bank) or a private lender. Which means all the more reason to get ALL the details from the broker so you understand what you’re getting into. Which also means your mortgage may or may not be reported anywhere.

C
[OP]
Newbie
Jun 9, 2019
28 posts
8 upvotes
Thanks.

When you say ,contract, is that written or is that a mutual agreement. To my information, post mortgage approval, a corporation would be created as a beneficiary to this property, that will mention the bank details and share etc... we also have couple of silent investors who personally will not be among the mortgage applicants since they have not bought their first house yet, but is very much trusted and would make due payments..

My primary concern is whether the co-applicant with higher income needs to take a higher risk in this deal or not....both immediate and future...
Deal Addict
Jan 1, 2017
1807 posts
1819 upvotes
Reddeals77 wrote: Thanks.

When you say ,contract, is that written or is that a mutual agreement. To my information, post mortgage approval, a corporation would be created as a beneficiary to this property, that will mention the bank details and share etc... we also have couple of silent investors who personally will not be among the mortgage applicants since they have not bought their first house yet, but is very much trusted and would make due payments..

My primary concern is whether the co-applicant with higher income needs to take a higher risk in this deal or not....both immediate and future...
What’s a mutual agreement? If it is not written on paper and signed it will be he said she said scenario. You should write and sign a contract with all the investors before you purchase the house. Otherwise you are setting yourself up for issues and risk.

Top