Tenancy in Common

Believe it -Tenancy in Common could be the gateway to purchasing your dream home!
There is a new trend in home ownership that is sweeping Santa Cruz County, and for good reason. In an area where the prices of homes are sky-high and the dream of owning a home often remains floating in the stratosphere, purchasing through Tenancy in Common (TIC) has become a very realistic, exciting, and creative solution.

What is Tenancy in Common (TIC)?
Tenancy in Common is a form of property ownership in which two or more people co-own real property together. Instead of owning an individual unit, each co-owner owns a percentage or share of the undivided property. Put simply, prospective homeowners pool their resources to leverage their purchasing power, making property affordable that they otherwise would not be able to afford alone.

Imagine…
Imagine, for instance, a building with four 2 bedroom units in it – hypothetically the property could cost at least $1,200,000 – with 20% down, at 6.75% interest for 30 years,  the monthly mortgage would be $6,226.54 per month*. For many people this is beyond their financial means.
Now, imagine if you and three other people pool your resources and purchase the building together. If you were responsible for $300,000 – with 20% down, at 7.75% interest, for 30 years, the monthly mortgage would be reduced to $1,719.39 per month*. This is comparable to what many people pay in rent! You get your own home, with all the benefits of home ownership, and it is affordable!

What is a TIC Agreement?
Part of the foundation for ensuring the success of a TIC is in the creation of a TIC agreement, or co-ownership agreement. The TIC agreement is a comprehensive document defining and covering all potential issues of occupancy, maintenance, management, ownership, and future sale of the property. The Agreement is created by someone with legal expertise, tailored to each group's individual needs, and is agreed upon and signed by all co-owners of the property.

How are TICs financed?
There are a variety of financing options available including individual and group loans. As TICs have become more popular, financing has also become more user-friendly.   New loan programs called Fractional Loans are available that enable each co-owner to have their own personal loan secured by the percentage of the property that they own. Thus, if one of the co-owners happens to default on their mortgage it will not affect the credit of the other co-owners

.What are the benefits of TIC?

Affordability:
TICs allow buyers to pool their resources and increase both their borrowing and purchasing power, making home ownership a possibility for many!  

Home Ownership Tax Benefits:
Each buyer owns a share in real property, providing h all of the tax deductions from mortgage interest and property tax that accompanies home ownership.

Lowering of Homeownership Costs:
Many people who want to downsize choose to invest in TIC property ownership because it provides them with all the benefits of homeownership while simultaneously freeing up equity and lowering their overhead costs through the sharing of group expenses – insurance, property taxes, etc.

Can a co-owner sell their interest whenever they choose to?
Absolutely.  Each co-owner can sell their interest in the property at any time.

How are expenses paid?
Expenses are generally separated into two categories: individual and group expenses. Group expenses can include such items as building insurance and property taxes.  The TIC Agreement will specify exactly what and how expenses are paid. Often, a group bank account is created and each co-owner makes a monthly payment to this account.

*Please note that these numbers are from a Simple Mortgage Calculator and do not include such things as taxes, insurance, maintenance, etc. Please consult a Loan Officer for more information.