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Co-ownership real estate models explained

March 9, 2022
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For many, homeownership was almost an expected part of life. Today, not so much.

According to the 2021 Manulife Bank Debt survey, homeownership is out of reach for three-quarters of Canadians who want to own a home and for those that are able to get into the housing market, 33% stated that they needed help from their parents.

Many Canadians, especially young Canadians and those who don’t have access to the bank of mom and dad, are being left out in the cold. In fact, it now takes the average urban Canadian homebuyer 28 years to save for the recommended 20% down payment.

There are a growing number of innovative alternative homeownership solutions to help people own a home and have the ability to grow home equity.

How do co-ownership models for homeownership work?

Simply put, a co-ownership solution enables a person to co-own alongside another property owner. This allows for a few key benefits; a lower entry point (the initial investment is just 2.5% for Key suites), no need to qualify for a mortgage, and the opportunity to build equity at their own pace.

As a co-owner, you would co-own part of your suite while living in it and being the sole co-owner (co-ownership is not a timeshare). This gives you more security of tenancy than you would have if you were renting. The remaining equity is owned by the investor or property owner.

Like in traditional homeownership, as the value of the real estate appreciates, so do the values of all of the equity partners’ investment in the property. You can learn more about how Key’s model works here and how it compares to traditional homeownership.

So, what do I actually own?

You co-own the suite you live in and no longer need to worry about a landlord knocking on the door and giving you 60 days’ notice. If you decide to move, you can do so with only 75 days’ notice.

When you move after the first year, you’ll get all your investments back plus your portion of how the value of the suite changed while you lived there. If you need to move in your first year, there’s a 5% penalty, so it’s best to know you want to live in the suite for at least one year before you become an Owner-Resident.

Key’s innovative model saves the hassles and a minimum of 6% of the costs involved with buying and selling traditional real estate.

How is home equity treated in co-ownership?

First, it’s important to understand what home equity is. It’s essentially the value of a homeowner’s investment in their property and is the portion of the home that they actually own at any given time based on its market value. Home equity is a central way to build personal wealth.

At Key, you can start building home equity years sooner. Every investment adds to your home equity, you can see how this works with our home equity calculator.

How does leverage work with co-ownership?

Key offers an optional Co-financing Benefit to help you build home equity faster. For every $1 you invest, you will also receive another $1 in leverage. Unlike a mortgage, you don’t actually have to take on this debt in order to enjoy the benefit of leverage. The only cost to you for this benefit is a small interest charge.

The $1 to $1 Co-financing Benefit applies up to when your home equity reaches 25% of the Suite value. After this point, it is applied at a lower ratio. Learn more about our Co-financing Benefit.

Co-ownership is an innovative way to start owning real estate many years sooner and help those locked out of the market participate in the benefits of homeownership. You can check out our FAQ for answers to our most common questions.

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