Sharing a Mortgage: Buying a Vacation Home with Friends

The idea of buying a vacation home with friends or relatives can be seductive. You can clearly

see the logic of doing so. You vacation together and you and your families get along famously.

But the leap from spending time together to entering into the financial arrangement of sharing a

mortgage requires serious discussion. There are numerous pluses and minuses when it comes to

buying vacation home with a friend or relative.

The Financial Arrangement of a Shared Mortgage: The Upside

Buying a vacation home is often the result of simple math: it is cheaper to own a home in the

place you love to vacation than it is to continue to rent one in your favorite location. But some of

the most desirable locations, destinations such as Caldera Springs or Sunriver in Central Oregon,

may be priced higher than a single payer mortgage borrower can comfortably consider. Adding

an additional payer can help alleviate that roadblock and put you into a better position to gain

entry into some amazing communities.

While the qualifications to obtain a mortgage remain the same, sharing the loan can make it more

affordable. Keep in mind, you will both be responsible for the loan, which will be based on an

average credit score, consideration of combined incomes, and of course, how the loan will

impact your current debt obligations.

Beyond the mortgage, arrangements need to be finalized. A shared mortgage in your favorite

vacation spot will save money but how much depends on pre-discussed percentages. Depending

on this arrangement, both parties are obligated to maintain the home. This arrangement should

also extend to the tax deductions that come with this arrangement.

The Financial Arrangement of a Shared Mortgage: The Downside

Perhaps like the adage of never lending money to a friend, sharing a loan with a friend can also

come with peril. Financial arrangements involving two personalities can expose not only

differences but weaknesses. This is a contractual partnership that should involve serious

considerations in advance. If that relationship breaks down, the options may be limited to selling

the house or refinancing the loan in your name alone. Selling in this situation may not garner the

best resale price. The refinancing option, in your name alone, may not be a viable option.

Another consideration is the evitable march of time. Financial situations change as unforeseen

expenses can create credit issues with either party. Because both names are on the mortgage, a

slide in creditworthiness of the other party will impact the credit score of both.

These types of loans make both parties fully responsible for the total mortgage. This may impact

your debt-to- income ratio, making it difficult to secure another loan, such as one for an

automobile. The lender will structure the loan based on the ability of both to pay, but other types

of loan application will not divide the responsibility for your payment, choosing instead to see

only your name on the mortgage.

How to Alleviate Problems

It is best to hire an attorney to draft a co-ownership agreement. You should probably create an

escrow account for insurance, repairs and improvements. If you plan on renting the home to

visitors, discuss the costs of marketing and management as well. It is also a good idea to

purchase a term life insurance policy on each other. Each of the listed suggestions adds to the

total cost of this arrangement and should be budgeted into the decision.

These arrangements can and do work for a vast majority of people who purchase a home

together. But the most successful homebuyers consider all of the potential upsides and

downsides, both personal and financial in advance.


How can we assist you today?


On behalf of The Jones Group @ Sunriver Realty

Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate

Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR

Karen Marcy, Broker/Realtor

The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707

Mobile: 541-420- 3725 | Mobile: 541-420- 4018 | Mobile: 503-327- 9611 | Fax: 541-593- 5123



Licensed in Oregon