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(June 7, 2021)

Intro (pre-amble): up to 7:21 mark of podcast

A mortgage refinance is often a momentous and rejuvenating experience. For most homeowners it’s an opportunity to reset and forge a new pathway to a more promising outcome (i.e. paying off high interest debt with low interest mortgage funds), and in the process of doing so, perhaps establishing or creating a more pronounced awareness of spending and more importantly, recognizing the consequences – of overspending. It’s a second chance…and rather than calling on a family member or close friend to bail you out, you call on your home to do so.
And then there are the refinancers coming from an entirely different angle…the ones that are looking to tap into their equity to further improve their net worth by borrowing from their home equity to invest. These are the refinancers who are set on leveraging good debt to create wealth and ultimately increase their net worth.

Regardless of what it is that motivates one to refinance their mortgage, another outcome arises that is often not accounted for:

What happens if I add a title holder during my mortgage refinance?

The first thing one needs to recognize when refinancing a mortgage is that if you plan on adding another individual to the mortgage, you are also required to thereby add that individual to the land title. And if there is only one thing that you retain from this article, let it be this: THERE ARE IMPLICATIONS WHEN YOU ADD SOMEONE TO THE LAND TITLE.

Before we explore the implications of adding another individual to the title, let’s first understand the two common ownership title registrations for properties with multiple title holders:

Joint Tenancy Ownership – this is the most common ownership registration for married or common law couples as the primary advantage of Joint Ownership is the right of survivorship. The right of survivorship means that if one owner passes away, their interest in the property automatically transfers to the other owner(s) on title as each owner owns 100% of the property as joint tenants.

Tenancy in Common Ownership – a form of ownership in which title owners are allocated separate shares of the property. The division of ownership can be whatever the title holders agree upon (50/50, 60/40, 99/1, 25/25/25/25, etc). Unlike Joint Tenancy Ownership, there is no right of survivorship. Tenancy in Common allows each owner to pass on their share in the property to their respective beneficiaries under their Will (if they choose to do so).

Here are some scenarios and outcomes to be aware of when deciding to register as Joint or Tenancy in Common ownership:

single title home owners may consider adding a family member to their land title as a Joint Tenant for estate planning purposes. For instance, in the event that the home owner passes away, the property title will transfer directly to the surviving joint title holder, thereby, avoiding probate fees and taxes
when adding a Joint Tenant title holder during a refinance, be aware that you may also trigger various forms of taxation. For example, in British Columbia the additional title holder will be subject to their share of a Property Transfer Tax. Also, depending on the relation to the original title holder and intent, the new title holder may also be subject to Capital Gains tax for the year they were added to the title
Another thing to be aware of with Joint Ownership is that if the occupant owner were to go into arrears on their mortgage, the derogatory credit rating would extend to the other owner, as well
In many instances, a parent co-signer is registered as a Tenancy in Common ownership with a 99% and 1% share distribution (child:parent) so as to minimize potential capital gains in the event of a sale. Joint Tenancy ownerships are also used for reasons other than capital gains.

My intent for today’s topic was primarily to raise awareness that there are implications when adding someone to your title during a mortgage refinance. Do not rely on this content as official policy and regulation, but rather use it as a starter conversation with your accountant and/or lawyer to better assist you in communicating your particular scenario. If you do not know of a lawyer or accountant that specializes in real estate, please don’t hesitate to reach out to me directly and I will gladly share with you my network of real estate lawyers and accountants (for Calgary and Vancouver).