Moving in: What to do when both you and your partner have a mortgage

Congratulations! Moving in together is an exciting step in any relationship. Cohabiting is on the rise in Canada—from 1981 to 2021, the number of common-law couples increased by 447% (much faster than that of married couples over the same period), according to Stats Canada. 

And it makes sense: living with a partner is a great way to cut down on expenses like bills and mortgage payments. But what do you do if you and your partner both have separate homes and separate mortgages? Before looking at your options, take a minute to think about what you want out of your new living situation and what would make you both the happiest. 

Set realistic expectations

You’ll first want to set some expectations about choosing which place to move into, but be sure to approach the situation as a team with the same goal in mind. Determining which home you should move into may be simple, but it could also be incredibly difficult, depending on a variety of factors. Here are a few things to consider if you’re stuck: 

• Location: Is one home more centrally located?  
• Space: Is one space bigger than the other? 
• Proximity: Is one closer to work or friends and family? 
• Affordability: Are the payments on one home more affordable than the other? 
• Equity: Has one of you owned the home longer or locked in a lower interest rate? 
• Specifics: Is there a specific reason why one home makes more sense than the other, i.e. for accessibility purposes? 

Try to imagine your life with your partner in your new living situation. While it’s great to be optimistic, it’s also important to be realistic about your feelings. For example, if your partner lived in their home with an ex, you may feel weird about it—and that’s ok. Deciding which home to live in together is a great way to have open conversations, and hopefully, you’ll come out even stronger. 

Balancing Dual Mortgages

Merging households while both partners have mortgages can be a complex challenge. Here's how to navigate this terrain, using statistics and market trends for a clearer picture:

In-depth Market Analysis

• Housing Appreciation: If you decide which property to sell, consider the appreciation rates. In 2023, the average Canadian home value appreciated by 2% year-over-year. Does one of your properties align with or exceed this trend?

• Days on Market: The average listing duration for homes in major Canadian cities in 2023 is 20 days. If one of your homes is in a high-demand area, it could sell faster than this average.

Key Financial Implications

• Tax Benefits: Most homeowners overlook tax breaks when selling their primary residence. Before selling, research the potential tax advantages.
• Equity Growth: Home equity in Canada increased by an average of 12% over the past three years. If one property has more substantial equity, it might be more beneficial to sell the other.

Exploring the Rental Avenue

• Rental Rates: Considering turning one home into a rental? Rental rates in urban areas of Canada rose annually. In Canada’s major cities, Toronto and Vancouver, which are among the priciest, recorded annual rent hikes below the average, with increases of 8.7% and 7.3% respectively. This growth rate could influence your decision.
• Occupancy Insights: With a high occupancy rate for rentals in metropolitan regions, there's a solid demand for rental properties.

What are your options when you and your partner both have a mortgage? 

Depending on your financial situation and needs, you and your partner have a few options. 

1. Move into one home, and make the other investment property

If you both love your respective homes, this is a great option that allows you to maintain ownership of both. Renting out one of the homes can be financially lucrative, but keep in mind that being a landlord can be time-consuming and expensive. You could always opt to work with a property management company or manage it yourself. 

You’ll also need to discuss whether the profits from the rental income will be split or shared. If you plan to merge any of your finances, a joint bank account for the rental income is a great place to start. But, it may be best for you to speak with a legal professional to ensure that you’re also added to your partner’s home deed if you’re renting your property. 

2. Move into one home and sell the other 

If you don’t want to deal with managing a property, you could always sell one of the homes. While this is a great way to generate income, it’s important to remember that selling your home can also be time-consuming—especially if you’re looking to renovate first. But it could be worth it if it makes sense for the two of you financially. 

However, you’ll also need to look at the financial repercussions of breaking your mortgage term. Whoever decides to sell between the both of you should hopefully have enough equity to pay off the loan balance and cover the closing costs. But, if you’re selling your home shortly after purchasing, check with your lender and see if a prepayment penalty applies to your mortgage. 

At this stage, it’s time for another open and honest conversation. How will you handle prepayment penalties and closing costs? Will you and your partner work together to sell the house, or is it up to the owner to sell? When the owner does sell, will they keep those profits, or will they be shared? 

If you can, try to have these conversations as early as possible so you’re not dealing with any surprises down the line. 

3. Sell both homes and buy a new home together  

There’s nothing like a fresh start. If you decide to buy a new home together, you’ll hopefully have the financial flexibility to buy a home you love and in a desirable location. In a hot real estate market, this option could be financially beneficial for both of you and could set you up with a nest egg in addition to a new home. 

Looking for a new home can also be an exciting new experience to share together. Of course, you will both need to list the homes, find a new home to live in, cover any penalties for breaking your respective mortgages, apply for a new mortgage, and then pack up each home. 

The bottom line 

Whichever route you take, the best decisions are made together and also when communication stays open, no matter how tricky the conversations are. But if you’ve both decided to buy a new, great home together, apply for a mortgage with Pine. And if you have any questions about your new mortgage, a mortgage agent would be happy to help.