Buying a house as an unmarried couple? Do these 3 things
Love and marriage don’t always go together, no matter what Sinatra says. If you are in a committed relationship but the nuptials are on the back burner, just know that your dream of buying a house doesn’t have to be.
In 2019, unmarried couples made up 21% of home buyers aged 22 to 29, according to an annual report by the National Association of Realtors. Over 85% were first-time buyers.
But many couples don’t realize how risky buying a home with an unmarried partner can be. Here’s how to overcome those risks with a little planning, a good lawyer, and a little awkward conversation or two.
1. Sign a marriage contract … for the house
No couple wants to talk about breaking up, but if you’re going to be a part owner, it’s a must, says Renee Bergmann, real estate lawyer and owner of Bergmann Law LLC in Westmont, New Jersey. She recommends that unmarried couples create a condominium contract with the help of a legal professional before the closing day.
The agreement should answer basic questions such as: what happens to the property if you separate? What happens if one of you becomes disabled or dies? Who pays the utility bills or major repairs?
Don’t just “wait and see what happens,” says Bergmann, because without a written agreement “things could get very complicated very quickly”.
2. Choose the right type of title
It turns out that there are many ways to own a home, and taking the title the right way is especially important for unmarried couples. The options vary from state to state, but generally include:
Exclusive property. Only one name is listed on the deed, and that person has all property rights and responsibilities.
Benefits: Individual ownership can generate tax savings if your income is dramatically different. And, if your partner has bad credit, applying for a home loan on your behalf only can help with approval. Remember, however, that ownership rights are determined by the names on the deed, not the mortgage, said Anna Fabian, vice president of products at SoFi, in an email.
Disadvantage: If the relationship ends and you’re not on the title, you may end up walking away with nothing, even if you contributed money to the purchase or the mortgage payments.
Flatsharing. Each person owns 50% of the property. In the event of the death of a tenant, his share is automatically transferred to the other roommate.
Pro: Roommates have a right of survivorship, so you won’t have to worry about fighting against estates or relatives for the house in the event your partner dies.
Disadvantage: An unfriendly break-up can be a source of problems, especially if one partner is unable or unwilling to redeem the other.
Tenants in common. Allows unequal ownership, so you could own a 75% stake while your partner owns 25%.
Pro: Ownership shares can be adjusted to match financial contributions; if you paid more for the down payment, for example, you may own a higher percentage.
Disadvantage: If one of the tenants dies, the other has no automatic right to that person’s share in the property, unless named in a will or living trust.
Whichever approach you choose, if you marry after the purchase, consider revising the deed to reflect your new legal status with what is called an “waiver deed,” says Bergmann.
3. Leave your parents at home
Buying a home is a stressful decision, so young, unmarried couples often get their parents involved, but sometimes that only makes things more confusing, says Danielle Moy, agent for residential brokerage firm Coldwell Banker in Orland Park, Illinois.
“I can say that the parents are not sure about the situation, and it causes a bit of an emotional roller coaster when they look at the houses,” says Moy.
Parents might have good intentions, but at the end of the day it’s your home and your decision, Moy says, so make sure you and your partner agree on what you want no matter what. what mom and dad think.
This article was written by NerdWallet and was originally published by The Associated Press.