Many people dream of vacation homes, but with property prices near record highs, many find this dream unattainable.

To overcome the affordability obstacle, buyers increasingly turn to friends and family to share the fun and responsibility.

Buying a vacation home with friends can be a creative solution that should be carefully considered and well-planned. 

Learn below the ins and outs of teaming up with friends or family for your dream property.

Should you buy a vacation home with friends?

The decision to buy a vacation home with friends starts with compatibility.

Before you move forward, ask yourselves the following questions to determine whether you are a good match:

• Why do you want to buy a vacation home?
• How well do you know each other?
• Can you openly discuss finances with each other?
• What are the expectations for participating in the purchase of the vacation home?
• How long do you plan to keep the property?
• Can you make decisions together?
• What’s your plan if someone wants out?

These initial questions can help you gauge your readiness and establish the foundation for what will become a serious partnership.

Benefits of buying a vacation home with friends

Buying a vacation home with friends or family can significantly ease the financial burden and create a lifetime of memories.

Let’s look at the benefits of sharing the wealth.

Cost sharing

Not only will you be able to split the down payment and closing costs for the property, but you also can divide the taxes, utilities, maintenance and other fees to reduce the overall costs for each person.

Access to better properties

Purchasing a vacation home with friends or family boosts your buying power so that you can afford more luxurious properties or homes in more desirable locations with your combined resources.

Investment opportunities

Co-owning a property helps you enter the market more easily and benefit from appreciation over time.

Additionally, when the property is not in use by either party, it can be used to generate rental income.

Shared responsibilities

Managing a vacation home can be a lot of work. Shared ownership allows you to divide the maintenance, repairs and upgrades to ease the workload and financial burden.

Options for the future

If one owner decides to sell, you have options for buyouts or selling shares without needing to sell the entire property.

Things to consider before you move forward

Before moving forward, all parties need to understand the financial commitment, including:

• Down payment
• Ongoing expenses
• Unexpected costs

Meet with an experienced lender like Compass Mortgage to discuss the qualifications and mortgage application process for multiple owners.

Our Compass loan officers can review your financial situation to determine whether you will likely qualify based on your credit scores, financial history and current financial obligations.

How does co-ownership work?

Two of the most common legal structures for co-ownership are joint tenancy and tenancy in common.

Let’s look at how these structures work.

Joint tenancy

In joint tenancy, each tenant owns an equal share of the property. The property can’t be divided or sold by one party without the consent of the others or without ending the agreement.

If one owner dies, their share of the property automatically passes to the surviving co-owners.

Tenancy in common

Tenants in common can own different percentages of the property, with each tenant reserving the right to sell or transfer their share.

When a tenant in common dies, their share is inheritable and can be passed on to their heirs rather than automatically transferred to the other owners.

Consult with a real estate attorney and financial advisor to better understand how these types of ownership can affect you and determine the right option for all parties.

How to finance your purchase

Once you decide how to proceed with the purchase, you’ll work closely with a mortgage lender to determine the best loan options.

Co-buyers apply for a mortgage together, and the lender evaluates all incomes, credit histories and debts to determine eligibility.

Each of you will be required to gather documentation to prove eligibility, including:

• Proof of income
• Tax returns
• Employment verification

You will have to decide on a fixed or adjustable interest rate, as well as your loan terms and type.

Compromise: Outlining responsibilities, usage and exit strategies

While you may be entering into a partnership with a friend or family member you have known for decades, it’s important to approach co-ownership professionally to avoid future conflict.

With an attorney’s guidance, draft a detailed co-ownership agreement that outlines all responsibilities and scenarios you may run into throughout the partnership, including:

• Financial obligations: Determine how to split all mortgage payments, property taxes, insurance and maintenance costs between owners.
• Ownership shares: Detail each owner’s share of the property if it’s different from equal shares and how these shares will impact the financial contributions and profits from potential sales.
• Schedule for use: Create a fair schedule for how and when each co-owner can use the property, including either a rotating schedule or a method for booking time.
• Management responsibilities: Assign specific duties or determine how decisions about property maintenance and upgrades will be made.
• Resolving disputes: Determine how you will resolve disagreements to avoid legal battles.
• Record-keeping: Describe how you will maintain records of expenses, decisions and agreements in a shared format.
• Exit strategies: Outline the process for selling shares, buyout options or the property’s eventual sale.
• Ownership changes: Include potential options and solutions for the death of a co-owner, divorce or financial considerations.

A co-ownership agreement can provide peace of mind, protecting each party from unforeseen circumstances while helping everyone involved make the most of their investment.

Next steps: Start your mortgage application

Are you ready to buy a vacation home with friends or family?

Compass Mortgage makes the process as smooth and stress-free as possible.

Start with our unique Get Committed® program to put you in the best position to win your desired property.

Start the purchase process with Compass Mortgage today.

We can’t wait to help you secure the vacation home of your dreams!