Love and marriage don’t always go together, regardless of what Sinatra says. For anyone who is in a committed relationship but nuptials are on standby, just know your dream of purchasing a home doesn’t need to be.
Purchasing a home being an unmarried couple? Complete these 3 things
16% of first-time home-buyers in 2017 were unmarried couples, an annual National Association of Realtors report found, the highest share the organization has recorded since 1981, says Jessica Lautz, managing director of survey research and communication for NAR.
However, many couples don’t know how risky purchasing a home with an unmarried partner could be. Here is how to cope with these risks using some planning, a good lawyer along with a slightly awkward conversation or two.
Buying a home as an unmarried couple
1. Sign a prenup for the house
No couple truly wants to discuss breaking up, however, if you’re going to be co-homeowners, it’s actually a must, says Renee Bergmann, a real estate attorney and owner of Bergmann Law LLC in Westmont, New Jersey. She recommends unmarried couples develop a co-ownership contract with the assistance of a legal professional before closing day.
The agreement should answer basic questions like: What will happen to the property if you split? What happens if one of you becomes disabled or dies? Who pays utility bills or for major repairs?
Don’t merely “wait and see what occurs,” Bergmann says, because without a written agreement “things may get messy instantly.”
2. Select the right type of title
Seems there’s many different ways to own a house, and taking title the proper way is extremely important for unmarried couples. Options differ 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.
Pros: Sole ownership may yield tax savings in the event your incomes are drastically different. And, if your partner has poor credit, trying to get a home loan in your name only could help with approval. However, remember ownership rights are based on names on the deed, not the mortgage, Anna Fabian, vice president of product at lender SoFi, said via email.
Con: In the event the relationship ends and you are not on the title, you’ll risk leaving with nothing even though you may have contributed money to the purchase or mortgage payments.
• Joint tenancy: Each individual owns 50% of the property. In cases where a tenant dies, that person’s share automatically transfers to the other joint tenant.
Pro: Joint tenants enjoy right of survivor-ship, so you will not have to be concerned about fighting the estate or relatives for the house in the event of your partner’s death.
Con: An unfriendly breakup could spell trouble, especially when one partner can’t or won’t buy the other out.
• Tenants in common: Allows unequal ownership, so you could own a 75% stake while your partner owns 25%, as an example.
Pro: Ownership shares may be tailored to match financial contributions; in the event you paid more toward the down payment, as an example, you can own a larger percentage.
Con: If one tenant dies, the other does not have any automatic right to that person’s share of the property unless named in a will or living trust.
Regardless which approach you select, for those who tie the knot after purchasing, consider revising the deed to reflect your new legal status with something known as a “quitclaim deed,” Bergmann says.
3. Leave your parents at home
Purchasing a home is a stressful decision, so younger unmarried couples often involve their parents, but sometimes this only makes things more confusing, says Danielle Moy, an agent with Coldwell Banker residential brokerage in Orland Park, Illinois.
“I can tell if the parents are unsure of the situation, and it causes a bit of an emotional roller coaster when they’re looking at homes,” Moy says.
Ultimately it’s your house as well as your decision, Moy says, so ensure that you and your partner agree about what you would like – regardless of what Mom and Dad think.
Ready to find your new home? Nick & Cindy Davis with RE/MAX Premier Group are here to assist you. We are always a just a click here away or call 813-300-7116