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The whole love, marriage, baby in the baby carriage thing doesn’t have to happen in that order anymore. Sharing your life with someone no longer requires a big shiny wedding and a marriage certificate. You get to make the rules, and that includes who you buy a home with.
Buying a house with someone you are not married to is doable, but it comes with some complications. Before you make this major commitment, let’s walk through six possible mistakes you might make when buying a home with an unwed partner.
1. Not being an open book
While secrecy is never a good thing in a relationship, it is especially damaging when it comes time to buy a home with your partner. If you aren’t married you may choose to keep your finances separate and private. Once you decide to buy a home together that needs to change. How much you make, how much debt you have, and how you tend to spend your money are all important conversations to have. You especially need to know if your partner has debt that will make it hard to secure a good mortgage loan or to make payments on time month after month. If there comes a day where you can’t make your mortgage payments, both you and your partner will run into some major financial trouble.
Sit down before you start your search for the perfect house and put everything on the table. You can still keep your finances separate, but should both be aware of the bigger picture. To make sure you are both on the same page about how you’ll pay for this new adventure, create a budget together to confirm that you can cover the expenses you’ll take on when you buy a home.
2. Creating a cohabitation property agreement
You don’t have to buy a house with a spouse (see what we did there) and you can buy one with a friend, family member, or paramour. When you buy a home with someone you aren’t married to — including a romantic partner — you need to have a cohabitation property agreement that clearly outlines how you will manage joint ownership and that gives you both protection (similar to the legal protections that come with marriage) in the event that you need to divide the property after a breakup.
Your cohabitation property agreement should outline the following details:
- Type of ownership on the property deed
- What percentage of ownership you each have
- Mortgage payment responsibility
- Buyout agreement
- What happens if one partner takes a job somewhere different
- Dispute process
- Exit strategy in the event of a breakup
- How you will pay for utilities and other household expenses
You should create this agreement with an attorney, and you should each work with your own separate attorney to make sure your best interests are being looked after. As a bonus, working through this process will force you to get on the same page about a lot of issues and will give you a better idea if you want to make this huge financial commitment together. The last thing you want is to lie awake at night thinking I regret buying a house with my boyfriend or girlfriend.
3. Planning for the title
When you aren’t married there’s a few different ways ownership can shake out and the title for your home needs to reflect how you choose to share (or not share) the property.
- Option 1. One partner owns the whole property.
- Option 2. Both partners own the property as joint tenants with rights of survivorship (if one partner dies the surviving partner owns both shares).
- Option 3. You can choose to be tenants in common in which shares of ownership are unequal and one or both partners chooses to pass their share onto someone other than their surviving partner (such as a child).
You need to know how you want to handle adding one or both names to the title before you buy a home. Again — a lawyer can really come in handy here.
4. Working out credit issues
If one or both of you has a bad credit score you will have some issues to work out surrounding get approved for a mortgage.
Let’s assume that one of you has a good credit score. It will be harder to qualify for a joint mortgage if one partner has bad credit, and even if you do qualify the interest rates will be on the higher side. You may decide that it’s best if only one of you (the one with good credit) takes out the mortgage. Even if only one partner is on the mortgage, both partners can have their name on the title, but only the partner whose name is on the mortgage will have the responsibility to repay it. This means that one partner will be entitled to partial ownership of the home but won’t be legally required to make payments for it.
5. Not having a backup plan
You may feel like you’ll never break up with your partner, but it is important to plan for the ending of your relationship as unlikely as it may seem. One of you may want to move for a job or you may simply grow apart..
You also need to plan for other unexpected life events, like disability, that may make it so one of you can’t work and contribute to the mortgage. Last but not least, you need to have a plan in place regarding the death of you or your partner. Depending on your ownership agreement, what happens in the event of one partner passing away can get complicated.
For example, if you own the property as tenants in common, who gets your share when you die needs to be specified in your will. If there is no will in place your share will pass onto your heir (or heirs) as dictated by your state’s intestacy law, which can lead to your partner owning a home with someone they never intended to. It may feel morbid to plan for the worst but it’s important that you do for the sake of the surviving partner.
6. Not updating agreements after marriage
You don’t have to get married in order to buy a home with your partner, but marriage may be something you still want after buying a home.
If you do make it down the altar one day, you need to revisit all of your paperwork and agreements to make sure you update everything to your liking as a married couple. You should also consult a tax professional after you get married to make sure you’re getting the most out of the mortgage interest deduction, which is harder to take advantage of when you aren’t married.
Owning a home with an unmarried partner can work if you take the steps to communicate properly and to make a clear plan for who will own the home, how you will make payments, and what will happen in the event that you break up or one of you passes away. Planning is key here, but once you get all of your ducks in a row you can focus on enjoying your new home together.