We’re Buying a Home as Co-Owners. How Should We Say It on the Deed?

In this pricey housing market, people are finding creative pathways to homeownership. Co-owning isn’t always a buyer’s first choice, but it’s one way to help buyers get homes that would otherwise be out of reach.

If you’re thinking of co-owning, how will you handle the mortgage? And how will you define the status of the co-borrowers on a deed? Consider these situations:

Pat can’t qualify for a mortgage alone, given the prices these days. Nancy and Pat want to get Pat a first home. They’d like to be co-borrowers.

Juan and Jeremy are ready to buy a house together, and want to make unequal payments. They both want to be owners. Neither wants to rent from the other. Because won’t own the home 50-50, they will be tenants in common.

Dian and Ignacio want to co-own, ‘til death do us part. They are spouses. Can they co-own as tenants by the entireties?

Each home’s deed will have multiple names — and a set of rights specific to each pair of owners. Let’s break this down.

Tenants in Common

When co-owners who aren’t spouses buy a home, they are often tenants in common. Each one owns a share of the property. They need not necessarily own it 50-50. The deed should show each owner’s percentage if the intention is to vest co-owners with different values.

Each person — no matter the amount invested — may legally have and enjoy the full property. Each is free to transfer or sell their share of the co-ownership.

If they sell together, they can split the proceeds according to their original investment percentages.

If one of them dies, the property goes into probate. Then whoever is named in the will comes onto the deed and joins in the tenancy in common.

Some tenancies in common name a homeowner’s business (typically an LLC) as co-owner. Some are set up by spouses who want their interests to be probated and pass according to the will, rather than automatically transferred to the surviving spouse. (The surviving spouse may quitclaim their interest at that time, if that suits the beneficiary and the survivor.)

☛ An important reminder: Don’t be an intestate real estate owner. If you don’t write a will, your state’s intestacy law may determine who gets your share!

Joint Tenants (With Rights of Survivorship)

In a joint tenancy, the term joint means the owners share their ownership equally, no matter what each paid to invest in it.

It’s very common for joint tenants to declare they have rights of survivorship (JTWROS). Why do co-owners choose this vesting? Well, as crucial as it is to write a will, it’s also true that a will can be contested. If the deed says you co-own the home with a right of survivorship, your interest as a surviving owner after the co-owner dies doesn’t need a probate court’s involvement. The person who survives automatically acquires rights in the real estate interest of the deceased co-owner.

In fact, if you own as joint tenants with rights of survivorship, neither owner can leave their real estate interest in their will. If they do, it won’t matter; the property will bypass the probate court. Again, the surviving co-owner will automatically have ownership. If there are more than one surviving co-owners, they’ll all become joint owners with equal shares.

To boil this down: With JTWROS, if you co-buy with a friend, relative, or significant other, and one co-owner were to die, the home would transfer the deceased’s interest to the survivor — in contrast to tenants in common, where the heirs of the owner who passed would get an interest.

Special Options for Spouses

What about community property? If you’re married, and co-buying in a community property state, you hold property in what’s called the marital community. You’ll both own the home, in equal shares.

To vest a home this way, you’ll both sign the deed. Either of you may transfer your interest, if there are no rights of survivorship. So, you can leave your interest to an heir, through your will. After you pass away, your heir will own the home together with your surviving partner as tenants in common.

Be sure, if you live in a community property state, that you really mean to hold your real estate as marital property — especially if you are the one paying most of the purchase costs. A consultation with a real estate or family lawyer could help avert expensive problems down the road.

☛ If your property will go into probate, consider writing a testamentary trust into the will, directing the home to your beneficiary. A family lawyer or estates lawyer can guide you.

Some states have provisions for community property with rights of survivorship. This vesting, which must be written on the deed, is parallel to JTWROS. It by-passes probate. The deceased spouse’s interest automatically combines with what the surviving spouse already has.

Another option that might be available in your state is deeding the home as tenants by the entireties (TBE). This means each partner may have and enjoy the property during life. Upon death of one co-owner, the other owns the whole home. This vesting type bypasses probate. Its other major plus? It keeps one spouse’s real estate interest shielded from the individual debts of the other. This is why, if you’re married, and TBE is available in your state, it’s worth considering.

How Does the Mortgage Work?

When you apply to finance a co-owned home, the lender will typically want both/all borrowers to be named on the deed as well as on the mortgage. Anyone named on the mortgage is responsible for the debt. This is always the case, whether they (a) live in the home or (b) live somewhere else, appear on the mortgage to help the primary borrower get a home.

It all means that if the primary borrower can’t make loan payments, the helpful co-owner has to pay the lender.

Generally, the lender decides to approve the co-owners by examining both/all co-buyers’ debts, incomes, assets, and credit profiles. Having someone else’s income or credit profile can help applicants borrow what they need. Still, the lowest co-buyer’s credit score will determine how much debt a lender will approve.

What Are the Downsides to Co-Buying Real Estate?

Co-buyers need to be confident in their relationships. Trust and respect are paramount. If the primary borrower can’t pay, a helpful co-owner could become frustrated. Their credit profile will be at risk because the primary borrower is not meeting promised financial responsibilities.

And if they are both occupants who pay the mortgage, they have to have similar tastes and lifestyles, and be equally committed to carrying out the duties of ownership.

If one co-borrower has a life event, and the other can’t cover unexpected costs, two credit histories are at stake — and the home will be, too. Especially when two or more peoples’ lives will be affected, it’s critical to plan out possible emergencies. What if a co-buyer’s employment becomes precarious? If one buyer plans to refinance — so that the deed goes from naming co-borrowers to naming a single borrower — is a solid timeline and agreement in place?

What’s the plan in a few years’ time, if one owner would like to stay in the home, and the other buyer insists on selling? If one owner isn’t in the position to buy the other out, the disagreement could take a serious psychological toll on both/all co-buyers.

Need More Information on How to Vest Your Ownership?

Seek guidance from a real estate or wills and estates lawyer in your state. Pursue your goals without creating unintended financial, tax, legal, or family issues. An attorney can explain legal tools you should know about, beyond deeds. These may include revocable living trusts, and, in certain states, transfer on death deeds.

There are potential pitfalls to anticipate when co-buying a home. Then again, in a very expensive market, co-buying is a reasonable pathway to the financial benefits homeownership brings.

Supporting References

Kathryn Pomroy for Ask Experian via Experian.com: Mortgage – What You Should Know About Co-Owning a House (Jan. 14, 2023).

Matthew M. Wallace for the [Michigan] Times-Herald: More Than One Deed Owner – Who Owns What?

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