Life-Partner Advice: Buying a House When Unmarried
With mortgage rates at record lows and an expanding definition of “family,” more and more people wonder how to safely buy a home without the traditional protections that being married provides.
Ask Lots of Questions
The first step on the journey is to be sure you want to take it together – and that involves LOTS of questions. How much income do the co-buyers bring in? How much debt and of what kind does each co-buyer have? What are their credit scores? What if you break up or one party wants to move out – who gets the house? What should happen to the property if one of you dies?
These are all questions that unmarried co-buyers should ask each other, wrestle with and DOCUMENT. Work with a legal professional BEFORE closing and create an agreement that lays out all these answers. Think of it like a prenup for the house. It may feel uncomfortable at first, but your ability to talk through these sticky issues will serve you in good stead as you navigate a financial life together.
Get the Right Kind of Title
Did you know there’s more than one way to own a house? Getting the right kind of title is especially important for unmarried couples. Options vary from state to state but generally include:
Sole ownership. Only one name is recorded on the deed, and that person has all the rights and responsibilities of ownership. Sole ownership can offer advantages if your incomes are drastically different or if your co-borrower has bad credit. Just remember, ownership rights are determined by names on the deed, not the mortgage. If the relationship ends and one person’s name is not on the deed, that person risks walking away with nothing even if they contributed to purchase costs and mortgage payments.
Joint tenancy. In this case, each person owns 50% of the property. Joint tenants enjoy right of survivorship, so you won’t have to worry about fighting estates or relatives for the house in the event of your partner’s death. If a tenant dies, their share automatically transfers to the other joint tenant however if there’s a painful breakup, trouble could be on the way if one person can’t (or won’t!) buy the other person out.
Tenants in common. Allows unequal ownership, so you could own a 75% stake while your partner owns 25%. The pro here is that ownership shares can be tailored to match differing contributions; meaning if you paid more toward a down payment, you can own a larger percentage of the property. The disadvantage is that if one tenant dies, there is no automatic right to that person’s share. A will or living trust can help mitigate that risk.
No matter which approach you choose; clear and open communication about money, goals and how to handle the unexpected can make the unmarried home-buying process a little easier. Good luck!