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Can a Roommate Help You Get a New Home?

Posted by Vanessa Freeman on January 9, 2018
Can a Roommate Help You Get a New Home Roommates ImageWhen you think about buying your first home, you're probably looking forward to all the independence that comes along with home ownership. But have you thought about all the ways a roommate can help you with the process? When you see how having a roommate could affect your mortgage, you might start giving it serious consideration.

Offset Your Mortgage Payment

As we mentioned, one of the biggest advantages of having a roommate is to offset your mortgage costs. For starters, let's assume you’re thinking about a condo that would require taking out a $220,000 mortgage and that you qualify for the current advertised rate of 3.34 percent on a four-year fixed rate (with a 25-year amortization). In this case, your mortgage payment would be about $1,080 per month (not including any payments for property taxes and insurance premiums.)

If you had a roommate paying $700 a month, you’d only be responsible for $380. This frees up your budget – allowing you to cushion your savings or even take a vacation.

Make Bigger Monthly Payments

Of course, the financially responsible thing to do is to apply the extra money you have towards the principal balance on your mortgage. If you were planning on paying the full $1,080 each month, you could add your roommate’s $700 to the payment and you’d actually be able to pay off your mortgage in only 13 years rather than 25 years. Even adding only $100 to the required mortgage payment each month helps you pay off the balance a few years earlier while increasing home equity.

Can a Roommate Help You Get a New Home Vector ImageBuilding Equity with Someone Else’s Money 

Speaking of equity, if you're one day hoping to own a single-family home, your purchase now will help you start building equity you’ll be able to use in the future. When you rent, you never get to see a return on the money you pay. When you move from renting to owning, though, you’ll get some of that money back when you sell the home. You can then use this as a down payment on a bigger home. Building up equity while you’re still young is smart, but using someone else’s money to build up your equity is even smarter.

Will It Work for You?

To make this work, you have to be the type of person who doesn’t mind living with others. If you’re sick of other people stealing your food and leaving their dirty dishes in the sink, this might not be the option for you. With another year or two of saving for a down payment, you may be in a better position to live alone in a home more affordably.

However, if you like living with other people, it’s time to explore some options. Many of the modern condo designs are well-suited to roommate life. The Robson model, for instance, features two separate master suites. Neither you nor your roommate will feel like it's settling when you live in this home. It also has a large, walk-in pantry in the kitchen, making it easy to keep food separate. The McCarran model is also a good choice because the bedrooms are on opposite sides of the home. This gives you and your roommate a bit of privacy.

Important Considerations

Though you might be planning to have your roommate help make the home more affordable, the bank won’t consider rental income when they make their decisions. You’ll have to qualify for the monthly mortgage payments on your income alone. This also ensures you won’t have problems making payments if your roommate moves out on short notice.

You should also be careful about choosing the right roommate. Remember another person might not care as much about keeping the home in good condition. In a home you own, you’ll be responsible for making repairs if the roommate damages any part of the condo. 
Roommates can help make a new home more affordable. It may not be the situation you’re looking for in the long run, but it’s a good option for young professionals who want to get started building equity in real estate. Talk to any one of our area managers to see how easy it could be for you to get into your very first home. 
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Photo credits: roommates, vector 
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Topics: first time home buyer