When you compare median house prices versus median household income levels, Vancouver ranks as the second-most unaffordable city in the world.
The 10th annual Demographia International Housing Affordability Survey showed that Metro Vancouver’s median house price was $670,300. With the city’s median household income at just $65,000, the survey gave Vancouver a median multiple of 10.3 – meaning its median house price is 10.3 times more than its median household income.
As the scale for the survey goes, a median multiple of 3.0 is considered “affordable”, while anything above 5.1 is considered “severely unaffordable”. At 10.3, Vancouverites are right to be concerned about whether or not they will ever be able to (comfortably) afford to enter home ownership.
With the city known for its housing affordability issues, it’s not surprising that some British Columbians wait to purchase their first home with a partner or spouse – two household incomes are better than one, right? But there’s a unique mortgage product on the market in B.C. that is designed to help all types of co-ownership agreements, no matter how many names are on the deed: Vancity’s Mixer Mortgage.
I talked to Vancity’s Mortgage Development Manager, Colin Lawrence, to find out more about how their product works and who is applying for it.
What is the Vancity Mixer Mortgage?
More and more Vancouverites are purchasing homes with family, friends and co-workers – not just spouses. The mixer mortgage is a product designed to not only get this special mortgage financing in-place, but also to get a legal co-ownership agreement drawn up that clearly outlines what everyone’s financial responsibilities are.
Who should have a co-ownership agreement?
A co-ownership agreement is recommended in any situation involving parties, not protected by a marriage agreement, who want to purchase real estate together, including family, friends and co-workers.
When did the product launch?
It soft-launched in 2006, but mixer mortgages gained in popularity in 2009, shortly after the financial crisis of 2008.
How does the application process work?
With a co-ownership agreement, you have to take people’s comfort levels into consideration. Some people have no issue with their financial information being spoken about in front of the other homeowners, while some others may want a little more privacy. So, co-owners can either come in together or be interviewed separately. Vancity is happy to conduct separate interviews, create a separate application for each owner, then put it all together and turn it into a mixer mortgage for one home.
Can buyers access your best mortgage rates with this product?
Absolutely. But what’s even better about the mixer mortgage is that co-owners can pick different mortgage rate types and terms! For example, if one owner wants the stability of a 5-year fixed rate while another wants to go variable for 3 years, they can both get what they want. Everyone on the property is responsible for the entire mortgage amount, but if you want separate accounts, separate terms and separate payments, that’s ok.
Is co-ownership always 50/50?
Not always. I just did one where it was 60/40, and the payments were setup so one buyer paid 60% of the monthly mortgage payment and the other buyer paid the remaining 40%.
What are the legal considerations people need to discuss before jumping into co-ownership?
For starters, you’ll want to decide how the property will be split, i.e. 50/50, 60/40, 70/30, etc. From there, you’ll want to discuss how your monthly expenses (property taxes, strata fees, utilities, etc.) will be distributed, as well as any future repairs or renovation projects. And you will definitely want to include something about how and when the property can be sold.
Basically, you can make the agreement as simple or as complex as you want, but before you sign anything you should sit down with the other owners and answer a series of questions together. We created an agreement checklist that includes a long list of things to consider including in your co-ownership agreement.
Is there one real estate lawyer involved, or do all owners use their own lawyers?
Typically, the owners will get one real estate lawyer to draft their co-ownership agreement and guide them through the transaction. With that being said, if there is a big difference in the amounts individual buyers are contributing for the overall down payment, then the owners may want to get separate legal advice.
How popular is the mixer mortgage?
We haven’t tracked the product separately, but it’s certainly one that is discussed with buyers often. With housing prices being as high as they are, there are so many unique co-ownership situations here in Vancouver: in a house, you may have one family upstairs and another downstairs; sometimes, several friends or co-workers purchase homes or condos together. The mixer mortgage opens potential buyers’ eyes to all of their options and helps people get creative with their mortgage financing.
Do you know of any other lenders who offer similar products?
I don’t know of any other mortgage product that is specifically designed for co-ownership agreements. With that being said, co-ownership is something people have been doing for years. Our mixer mortgage just helps make it possible for the individual co-owners to get a mortgage product that works for them, while outlining all the legalities of who is responsible for what.