Life in Richmond, Virginia was getting more expensive for Jennifer Martin, her husband Daniel and her other partner Ty. In 2020, the polycule started to live together so they could split the rent three ways.
Just a few years later, inflation started to cut into their budget. Their shared living situation was benefiting them financially, but the burden of student debt and the high cost of living in the city was making things harder.
The three of them decided to take the plunge and buy a home together. After a few months of house hunting, they purchased an older four-bedroom property in the suburbs nestled on an acre of land.
Martin was surprised by how easy the process was. “I expected a lot more financial hurdles because we weren’t raking in the dough individually,” Martin said.
She learned from her real estate agent that it’s not just married couples buying houses. In fact, it’s far more common these days for multiple folks to get a mortgage together.
The major advantage of cobuying a home? It makes homeownership more affordable.
More than half of aspiring homeowners report that their income isn’t high enough to cover the down payment and closing costs on a home, according to Bankrate’s recent down payment survey. And home prices keep going up year over year. The median existing single-family home price was $397,200 in March, up 4.7% from the same month in 2023, according to the National Association of Realtors.
Buying a home with a friend, relative or partner can relieve financial hardship in today’s challenging housing market, marked by high mortgage rates and low inventory. And the cobuying trend is picking up. According to Zillow, 14% of homebuyers purchased with a friend in 2023 and 12% purchased with a relative who wasn’t their spouse or partner.
If you’re considering sharing a mortgage outside of a conventional marriage arrangement, the process might be more straightforward than you think. However, you should expect a few hurdles along the way. Be prepared to walk through the pros and cons and take additional measures to protect yourself.
Who else might you share a house with?
Though cobuying a home is becoming more prevalent among friends and those in polyamorous relationships, the most common nontraditional arrangement is sharing a purchase with siblings or other family relatives, according to Pam Hughes, who helped found CoBuy.io, a cobuying and co-owning platform. CoBuy’s 2024 survey and report notes that 42% of co-ownership arrangements are mixed groups involving more than one relationship type.
How many people can be on a mortgage?
While there’s no official cap on the number of people on a mortgage, most lenders won’t accept more than four borrowers, according to Bankrate, CNET’s sister site. CoBuy’s 2024 report says the average number of people in a group sharing homeownership is a little more than three.
Once you have more than four borrowers on a home loan, the mortgage underwriting process is no longer automated and must be done manually, according to Hughes. That makes unconventional financial arrangements for a larger group more of a hassle for lenders.
But even if you could have 10 people on a mortgage, would you want to? With more co-owners involved, it can lead to more complicated relationship dynamics, not to mention difficulty budgeting, splitting bills and covering housing-related expenses.
Pros and cons of buying a home with a nonspouse
Partnering with a friend or relative can make a home purchase more attainable, but it’s best to go in with a clear understanding of the upsides and downsides.
Pros
Can afford a bigger down payment. If you’re all contributing to a down payment, you can potentially afford more on a home. If all co-borrowers have a strong credit score, low debt load and steady income, it could make it easier to meet the lender’s credit and income criteria.
Split ongoing costs. You can also split recurring costs of homeownership, such as homeowners insurance, property taxes and general upkeep and repairs.
Don’t have to pay private mortgage insurance. If you’re able to cover at least 20% of the cost of the home from the get-go, you won’t have to pay private mortgage insurance.
Become a homeowner at a younger age. The median age for a first-time homeowner is 36. If you can team up with a few friends or partners to purchase your first home, you might be able to buy a home in your 20s or early 30s.
Cons
More paperwork. When you have multiple people on a mortgage, each person will need to submit an application. Expect to deal with more paperwork and work out the details of the property deed. You might want to create a cohabitation agreement, which we’ll get into below.
Your credit might suffer. If one of the cobuyers fails to keep up with mortgage payments, it might bring down your credit as well.
Finances impact each other significantly. If a co-owner loses their job or gets hit with a slew of unexpected expenses, that could strain the finances of the other homeowners.
Can put stress on the relationship. Without a clear understanding of each other’s money habits or financial history, a long-term commitment like buying a house could put unforeseen burdens on the relationship.
6 tips for buying a home with a nonspouse
1. Evaluate your relationship
Since sharing a mortgage is a decades-long commitment, think about the type of relationship you have with your cobuyers. Will these people be in your life for years to come? If they’re family, like a sibling, cousin or aunt, what is the dynamic of your relationship? Do you feel comfortable working out a plan with them to split the mortgage loan and other housing costs?
2. Learn each other’s finances
Pay close attention to the potential cobuyer’s financial history. What is their current credit and debt situation? How much money do they earn, and what do they have in savings? How reliable are they in keeping up with bills? Are they open to having difficult discussions about finances?
3. Discuss details and desires for your property
Talk about what you’re looking for in a property as early as possible, including the size of the home, location, safety and proximity to schools, parks and restaurants. If you’re working with a real estate agent, outline any details that might be useful. Use a mortgage calculator to figure out how much house you can afford. From there, look at inventory that’s within your price range.
4. Consider the tax implications
You’ll want to see if there are restrictions on tax deductions -- such as mortgage interest, property taxes and home improvements -- when you co-own a home. The amount of your tax break will likely be related to your portion of payment on the mortgage, but you should talk to a tax professional to work out the specific details of your arrangement.
5. Create a legal agreement
Cohabitation agreements are legally binding documents between unmarried people that include financial and property rights. You and your cobuyers can draft one with an attorney, outlining how you’ll be handling the mortgage, insurance, taxes, utilities and other housing costs. It can also include contingencies and buyout and exit strategies.
Before coming up with a cohabitation property agreement, think about what might be a deal-breaker for you. Walk through extreme scenarios, such as death, disability, divorce or job loss. Working out this kind of agreement can help you be prepared for any crisis that might come up. You’ll also want to make sure there’s plenty of discussion about the names on the property deed.
6. Think twice before setting up an LLC
Before cobuying, some people form up a business structure called an LLC, a Limited Liability Corporation. When you have an LLC, your personal assets are protected from your business assets, making it easier to partner with different people to co-own a property and shielding you from direct liability.
While an LLC offers several perks, including more privacy, setting up an LLC to co-own a home with a partner, family members or friends isn’t very practical. Setting up an LLC takes time, costs money and can add complications, and most mortgage lenders won’t lend to an LLC set up for a primary residence, according to CoBuy. However, an LLC might make sense if you’re cobuying a home as an investment property or as a shared vacation home.
Cobuying a home is a personal journey
If you want to cobuy a home with friends, siblings or romantic partners, it will really depend on how capable you are as a group to plan, manage and get through the process.
In the case of Martin and her two partners, the three of them had already been dividing rent, bills and other living expenses before they decided to buy a home. Martin was legally linked to her husband Daniel through marriage (and two kids), and she was financially linked to Ty through end-of-life documents, credit cards and savings accounts. That gave them more experience wading through potentially sticky financial and legal matters before they took out a mortgage together.
In today’s economy, cobuying with a nonspouse or as a group can provide an affordable route to homeownership. Having more than two streams of income makes it easier to balance debt and the high cost of living. Plus, it can enhance social relationships, bringing more value and connectedness to daily living.
“If I weren’t polyamorous, I’d still want to live in a nontraditional setting just to be around more people,” Martin said.
Nonetheless, owning a home isn’t a walk in the park. And when you’re doing it with more people, be prepared for a different set of challenges.
“Just make sure it’s with people you trust financially,” Martin said.
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