So I was watching Property Virgins the other day (What?! Just because I don’t want to buy a home doesn’t mean I am not interested..), and there was a couple who was buying a home with a friend.
The conversation kind of went like this:
Sandra (Realtor): So how much do you have for a down payment?
Single Guy: Well I have $25,000 and I think they [points to couple] have something like $10,000 – $15,000 as well.
Couple (Together): Uh….. well. $25,000 as a down payment.
Sandra: So you have $50,000 then?
Single Guy: Yeah, about $50,000 then.
Couple (Woman): No. Um.. *laughs nervously* It’ll only be $25,000.
Single Guy: But I have $25,000.
Couple (Woman): Yeah, so the down payment is $25,000.
Sandra: Well this is news to us! [gestures to Single Guy]!! *awkward laughter*
HOLD THE PRESSES SINGLE GUY!
YOU NEED TO BAIL ON THIS HOUSE PURCHASE RIGHT NOW!!!!!!!
You are planning to buy a house with your single guy friend (same age) who has saved up $25,000 for a down payment, and you two as a couple have $0 down?
What is the benefit for that Single Guy then? It’s basically like you get to own half the house without paying anything up front!
Even if they manage to come up with the cash later to “pay him back” to have an equal $25,000 stake in the house, the point is more that $25,000 TODAY is worth more than $25,000 TOMORROW (or whenever they pay him.. if ever).
Heck, even $1 yesterday, is worth more than $1 today due to inflation (3% on average).
Now you’re saying: But they can take out a loan for $25,000 to pay him.
Yes they could, but then you’re just buy debt.. with more debt. No?
A house has no equity until you pay it off.
A house is owned by the bank until you pay it off.
You do not own the house. Yet.
The bank owns the house, you’re just paying them money each month hoping to clear the balance before you retire so that you can own it free and clear.
CAN YOU REALLY TRUST THEM WITH MONEY?
A house needs a down payment. If you can’t save up for a decent down payment, you can’t afford the house.
Period. No ifs, ands, buts.
If you can’t save enough for a down payment (let alone save ANYTHING), then you can’t afford the house.
Poor Single Guy coughed up $25,000 of his savings and still had $5000 budgeted for furniture and stuff because.. well he’s responsible like that (although Sandra said it was going to go to realtor fees).
The (Freeloading) Couple, coughs up $0 and still wants to own half the house.
Is this really fair?
Okay, so the SMALL benefit is that they are on the hook for half of the mortgage payments, but who’s to say they won’t bail on you and/or find another way to be weasels?
If they don’t pay their half, YOU have to come up with that half, or lose the house.
Case in point: They couldn’t even come up with a measly $5000 in their entire lives to put down to make it $30,000.
Frankly, not only should the ENTIRE house be in Single Guy’s name, but if they’re paying the mortgage, they should be on a plan to pay more than half the mortgage to equalize it back up to $25,000 coming from them, and/or just rent from him forever.
SO WHAT HAPPENED IN THE END?
Honestly I had to go to yoga, so I didn’t watch the rest of it, but I’m sure it ended badly.
Either they didn’t buy the house in the end and Single Guy bailed (I hope he did), or they bought it together and it was a big mistake.
I think their friendship would suffer as a result. How can it not? Even I as a viewer, could see it as being unfair.
SO WOULD YOU EVER BUY A HOUSE WITH A FRIEND?
My short answer? No.
Unless we plan on being bachelorettes for the rest of our lives (cat-and-dog-free because I’m allergic), I am not planning on buying anything with anyone but a partner, and even that is debatable because I don’t want a house here in Canada.
Not for these prices ($500,000 is the average home price in Toronto. Are you sick just thinking about it like I am?), and not for this quality of new houses (not stone, basically chip board held together with nails, thrusts, and a concrete foundation, with a flimsy roof).