When 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 home with monthly mortgage payment of $1,000. If you had a roommate paying $500 a month, you’d only be responsible for the other $500. 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 $1,000 each month, you could add your roommate’s $500 to the payment and you’d actually be able to pay off your mortgage even faster. Even adding an extra $100 to the required mortgage payment each month helps you pay off the balance a few years earlier while increasing home equity.
Building Equity with Someone Else’s Money
Speaking of equity, if you're one day hoping to own a larger 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 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 that can deal with your roommate leaving their dirty dishes in the sink or sealing your food. If not, this might not be the best option for you. With another year or two of saving, you may be in a better position to make living alone more affordable.
However, if you like living with other people, it’s time to explore some options. Many of StreetSide's floor plans are well-suited to roommate life. The Bourbon model, for instance, features two separate master suites. Each room has its own walk-in closet and ensuite. Neither you nor your roommate will feel congested when you live in this home.
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 & maintenance of the home.
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. Chat with us today to see how easy it could be for you to get into your very first home.