We introduced our co-ownership model last year, allowing aspiring home-buyers to enter the real estate market many years sooner and the opportunity to start building home equity for as little as 2.5% or 15K for most Key suites, and no need to qualify for a mortgage. With decreasing monthly payments as ownership increases, Key addresses a real problem in the real estate market giving renters stuck on the rental treadmill access to homeownership. 

One of the significant benefits of homeownership is the leverage component. To give our Owner-Residents the benefit of leverage, we recently launched a Co-financing Benefit that complements the existing co-ownership model by adding leverage and allowing Owner-Residents to benefit from more appreciation as the value of their suite increases. 

As condo prices keep rising in Toronto, the gains from appreciation are the name of the game when it comes to building home equity. And, co-financing doubles down on this exact proposition. 

What is Co-financing? 

With Key, every investment you make increases the amount of your home you own, and your percentage ownership increases. With Co-financing, for every $1 investment you make, you receive an additional $1 in leverage until your home equity reaches 25% of the suite value. After this point, it is applied at a lower ratio. 

Unlike a mortgage, Owner-Residents enjoy the benefit of leverage without taking on the debt. The only cost for the benefit is a small interest charge added to your monthly payment. For example, if you invest $5,000, you receive an additional $5,000 in leverage, doubling your co-ownership account as you buy more equity. Therefore, as the value of your condo increases in the market, the appreciation will also double what you’ve invested.

Check out our VP of Business Development, Mark McLean explaining it in this video:

@marcomclean

Forget renting. Start owning a condo in Toronto for less with @lifeatkey #foryou #foru #realestate #realtor #mortgage

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How does it work?

Here’s a quick example to illustrate this: 

For a $500,000 condo that increases to $700,000 in 2 years: 

  • Initial Investment: $12,500 (2.5%)
  • Co-financing Benefit (leverage): $12,500 (2.5%)
  • New ownership with co-financing: $25,000 (5.0%) 

In this example, the Owner-Resident benefits from appreciation that’s based on a $25,000 contribution to their equity even though they only invested $12,500. So, when they move after two years, they get $10,000 instead of $5,000 on the $200,000 that the suite appreciated while they were living there. Plus, they get their initial $12,500 investment back. 

The Co-financing Benefit would have led to the Owner-Resident earning $5,000 more on the appreciation and it would have only cost them $715 in interest.

The difference between Co-financing & traditional mortgages

The unique aspect of Key’s co-financing is that, unlike traditional mortgages, an Owner-Resident does not actually take on this debt to enjoy the benefits of leverage. The only cost to Owner-Residents is a small monthly interest fee based on a preferred rate that’s negotiated by Key with bank lenders. It fluctuates based on market conditions, and Owner-Residents are notified before any change in the rate. 

Why should Owner-Residents care?

Since co-financing doubles the co-ownership account, when it’s eventually time to move out/sell, all of the appreciation from the co-financing goes to the Owner-Resident along with the equity invested plus the appreciation. In return, Owner-Residents pay a small interest fee at a preferential rate and do not get locked into a massive mortgage. 

As Key’s primary proposition is the introduction of a third option in the market, the new co-financing benefit provides the advantages of a mortgage but ignores the shortcomings and burdens of the traditional mortgage model. Building home equity with Key’s unique co-ownership model is unrivaled in the market today. 

If you’re interested in learning more about Key, check out how co-ownership works and how Key compares to traditional ownership.