We are buying our first home. The bank insists that we add my father as a co-owner of the home in order to qualify for the mortgage amount we need. The entire down payment is coming from our savings and we will be making all the mortgage payments. I would rather not include my father as a co-owner. What are your suggestions?
Guarantor of the mortgage vs. being registered on title as owner
Adding a person who is not going to be living at the property as a co-owner is generally not recommended, unless you are buying an investment property. You should discuss with your bank whether it would be sufficient to have your father as a guarantor on the mortgage, rather than a co-owner. If the bank still insists on your father’s ownership, there are ways to structure the co-ownership in order to protect everyone’s interest and to minimize your father’s exposure to any tax related consequences of owning a second home.
Joint Tenancy and Tenancy in Common
There are two ways in which two or more individuals can own a real property together. They can own it as either joint tenants or tenants in common. The main difference between the two is that people who own a property as joint tenants have a right of survivorship, meaning that if either one of them dies, his or her ownership share passes automatically to the other surviving joint tenants. This is in contrast with tenancy in common, which does not have a right of survivorship, meaning that the share of the deceased tenant in common becomes part of such person’s estate. With tenancy in common you can also specify a size of a share that each co-owner owns. For example, your father can own a 1% share of the home and you and your spouse the remaining 99% share, with all of you owning the home as tenants in common. This will ensure you and your spouse’s share becomes part of your estate rather than transferring to your father in case something happens to both of you.