Navigating Joint Homeownership: Benefits, Risks, and Planning for the Unexpected

Why More People Are Buying Homes Together

As real estate prices in Portland, Oregon, and across the country continue to rise, more buyers are exploring alternative ways to afford homeownership. One increasingly popular option is buying a home with a friend, family member, or group rather than purchasing alone. While this strategy offers many advantages—including greater purchasing power and shared expenses—it also comes with unique risks that buyers should carefully consider before making such a significant financial commitment.

In this guide, we’ll explore the benefits and risks of joint homeownership, key financial considerations, and strategies for planning an exit strategy in case circumstances change. Whether you’re thinking of buying a home in Portland with a friend or entering into a real estate partnership, this information will help you make an informed decision.

Financial Considerations When Buying a Home with Others

1. How Lenders Assess Joint Mortgage Applications

One of the most important things to understand before purchasing a home with a friend, family member, or investment partner is how lenders evaluate mortgage applications. Unlike individual buyers, joint mortgage applications are assessed based on the worst financial aspects of all applicants. This means that the lender will:

• Consider the lowest credit score among all applicants
• Evaluate the lowest income level in the group
• Assess the highest debt-to-income (DTI) ratio of the applicants

Because lenders prioritize risk, they base their approval on the highest-risk applicant in the group. This can affect your interest rate, loan terms, and overall borrowing power. If one applicant has poor credit or significant debt, it may be worth discussing whether another person in the group should apply for the mortgage individually while structuring ownership differently.

2. Increasing Your Purchasing Power

One major benefit of buying a home with others is increased financial strength. When multiple buyers pool their resources, they often have:

• A larger combined down payment
• The ability to afford a more desirable home or location
• Shared monthly mortgage payments and maintenance costs

For first-time homebuyers or those looking to invest in Portland’s competitive real estate market, joint ownership can be a smart strategy. However, it’s critical to establish financial agreements upfront to avoid future disputes.

Legal Considerations and Ownership Structure

3. Choosing the Right Ownership Agreement

When purchasing a home with someone other than a spouse, you’ll need to decide on the best ownership structure. There are two common ways to legally own a home as a group:

• Tenants in Common (TIC) – Each owner holds a specific percentage of the property, which doesn’t have to be equal. This is ideal if one person contributes more to the down payment or mortgage.
• Joint Tenancy with Right of Survivorship (JTWROS) – Each owner has an equal share of the home, and if one person passes away, their ownership automatically transfers to the remaining co-owners.

Discussing and choosing the best structure with a real estate attorney is essential to protect everyone’s interests.

4. Planning for the Unexpected: Exit Strategies

Life changes—relationships evolve, financial situations shift, and priorities change. That’s why it’s crucial to create an exit strategy before purchasing a home together. Here are some key questions to consider:

• What happens if one person wants to sell their share?
• How will you handle mortgage payments if someone loses their job?
• Who is responsible for property taxes, maintenance, and home repairs?
• What happens if one owner passes away or becomes incapacitated?

To avoid disputes, all owners should sign a co-ownership agreement outlining these scenarios. This legal document should detail:

• Buyout options – If one owner wants to sell, do the others have first refusal rights?
• Sale procedures – How will you determine the listing price and divide the proceeds?
• Dispute resolution – Will disagreements be settled through mediation or legal action?

A well-drafted agreement provides clarity and protects all parties involved.

Tax Implications of Joint Homeownership

5. Understanding Tax Deductions

Owning a home comes with potential tax benefits, including mortgage interest deductions and capital gains exemptions. However, when co-owning a home, tax benefits may not be automatically shared equally. Here are some key considerations:

• Mortgage interest deductions – Typically, the person whose name is on the mortgage receives the tax benefit. However, some tax professionals allow co-owners to split deductions if they equally contribute to payments.
• Capital gains tax exclusions – If you sell the home and each owner has lived in it for at least two of the last five years, both parties may qualify for up to $250,000 in tax-free capital gains ($500,000 if married).

Because tax laws vary, always consult a lawyer, CPA, or tax advisor to ensure compliance and maximize your deductions.

Work with a Trusted Portland Real Estate Expert

So yes, you can buy a home with a friend or group, and there are definite benefits…just be sure you have all the facts and plan an exit strategy in case you need it. If you’re considering buying a home in Portland with a friend, family member, or investment partner, our experienced team at Paris Group Realty, LLC can guide you through the process. We’ll help you navigate the process and connect you with trusted advisors if necessary, to ensure a smooth home-buying experience.

Have more questions or want professional advice on buying or selling a home?

Contact us at info@parisgrouprealty.com or (503) 926-5213. We’re here to address all your real estate needs!