Given the price hikes for real estate buyers, condo ownership and investing may seem unachievable. But if you're set on investing in real estate, there are many strategies you may use, including co-buying, to avoid paying market rates and meeting strict credit score requirements.
What is Co-ownership?
Co-buying, also known as co-ownership in the Philippines, occurs when two or more people opt to split ownership of a home after purchasing it. In a co-buying arrangement, the property owner may be a couple, a family, close friends, a group of people or enterprises, or a combination of the two. Being an owner is the same as being a co-owner, with the distinction that the co-part buyers are based on their respective interests.
Because co-buying enables cheaper mortgage payments, more equity growth, and utility cost savings, it is a rising real estate trend that may hold the key to ending the ongoing housing crisis. Co-buying is still a relatively new idea in the Philippine real estate market, so it may take some time before it becomes widely accepted there and before the populace becomes accustomed to it. Despite this, it benefits young people who are looking for property in the future.
Additionally, co-buyers rights to their respective property shares are equally important. These rights include the capacity to exploit the fruits and benefits of the property, mortgage it, sell it, seek payment for any fees that were prepaid for the co-owned property, let a third party use or enjoy it, and demand partition.
Rules on co-ownership
Article 494 of the Philippine Civil Code states that co-owners may agree to maintain the property's undivided status for a maximum of ten years. By renewing the agreement, the time frame may be extended.
However, because of the intricacy of the legal procedures in the Philippines, co-ownership is only encouraged among your bloodlines, ideally close relatives. To avoid worse issues down the road in the event that the two separate lovers or unmarried partners are not recommended to co-own properties.
Philippine banks and lending institutions accept married couples' siblings, parents, and spouses as co-owners. Second-degree relatives may be considered, but both parties must be fully aware of their legal commitments.
Types of Co-ownership
You can choose a co-owner from two popular types of co-ownership based on their characteristics
Joint Tenants With Right of Survivorship (JTWRS)
When all tenants share in the ownership of an undivided property, making it so that no one tenant has a specific portion of the property. The co-ownership is split 50/50, giving each co-owner an equal share of the property's rights. When a co-owner passes away, the claim he held immediately passes to the surviving co-owner.
This is the case when spouses jointly own the family home. The "right of survivorship" applies to you and your spouse if you bought your house together. The surviving spouse and heirs will receive the entire house if one partner passes away.
Tenancy in Common On
As a result, the co-owners are permitted to have different rights or interests in the property. This occurs when a co-owner possesses a particular chunk of undivided land. This is advantageous since it ensures that the share of a deceased renter goes to their beneficiary rather than the partner. If one of you spent more money on the property than the other, this would work best.
If one of you decides to rent the property, the other co-owners are still entitled to ownership and the rental money.
A "title" and "deed" paperwork you will receive when purchasing any property with a co-owner will specify how you and your partner will share the property. This is beneficial, particular when a co-owner has passed away or when self-interest has altered.
Pros and Cons of Co-ownership
- When the down payment and mortgage are split, owning a home is more affordable.
- You'll have the opportunity to start building up equity in a home early in life.
- Reduces the cost of utilities and other household maintenance expenses.
- If there is a split, the asset is split according to a predetermined formula.
- The buyer with the lowest credit score chooses the interest rate.
- If one co-buyer cannot make the required payments, the other co-buyer is responsible for doing so.
How does co-buying work?
Given all the variables involved, co-buying could seem overwhelming. There are, however, techniques to keep confrontation to a minimum. You must have a written contract stating the obligations of each owner.
A real estate attorney should draft these documents, which should include the following information:
- Your choice of title for your residence
- Who will cover what share of the mortgage and down payment?
- What allocation method will be used?
- How will the claims be handled in the event of a death
- How will you react if one co-owner can no longer make payments?
- What to do if one of the owners wants to end the relationship
A significant life event for someone is purchasing a home. Although it can be challenging, the trip can be rewarding. Some people decide to buy a piece of property jointly with another person. Many people are unaware that buying a house alone versus buying a property with someone else involves two different situations.
Co-ownership refers to using the same property ownership rights as another person. In contrast to just buying a home alone, it has its own legal and financial process. And while purchasing a home with your partner, business partner, family, or friend can be thrilling and doable, it could eventually lead to emotional and financial hardship.
As long as you establish clear guidelines with your co-buyers and seek legal advice, co-buying doesn't have to be as complicated as it might sound. To afford their preferred property, more young homebuyers choose co-buying agreements as the cost of homes continues to grow.
For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.