Buying a House as an Unmarried Couple
Let’s face it. The idea of splitting the bills, chores, and other various expenses that come with owning a house can sound super appealing. If you’re already in a relationship, owning a home with your significant other seems like a no brainer. Market prices and mortgage rates continue to remain steady, so why not? A recent 2013 study found that one in four couples between the ages of 18 and 34 bought a house together before they were married. With all the signs pointing to “BUY IT!”, we still recommend that you take the following factors into consideration before making the leap into unmarried homeownership.
Who Will Apply for the Mortgage?
As you may know, a good credit score can go a long way when getting approved for a home loan. If you or your partner have credit that’s in bad standing, this could affect your chances of approval. Lenders will look at your individual scores from each reporting agency first, then take the middle score. The lowest score between the two applicants will be the score used to determine approval and mortgage interest rate.
So, let’s say you have great credit, but your partner is working toward a higher score. Your partner could be on just the title, not the loan. This will, of course, come with additional risk as the debt of the home financially falls on just one person.
How is the Property Titled?
There are three general title options homebuyers should be aware of, especially if they are buying a home unmarried.
Sole Ownership: Only one name is listed on the deed, and as we mentioned above, this persona has all the rights and responsibilities of homeownership.
Joint Tenancy: Each person will own 50% of the property. If one tenant were to die, their share of the home will automatically transfer to the other tenant. The right of survivorship also prevents estates or relatives for the home in the event of your partners’ passing.
Tenants in Common: This allows for unequal ownership. For example, you could own 75% of the property and your partner owns the remaining 25%.
Do You Have a Backup Plan?
As uncomfortable as it may be, it’s crucial to discuss what will happen to the property if you and your partner were to split up or if one of you were to die.
In the case of death, choosing the right title for you and your partner could make all the difference. However, ending the relationship brings on more uncertainty for ownership. Forbes recommends unmarried couples agree to a partnership agreement or a homebuying prenuptial. This will help address issues such as:
- Who is contributing financially?
- How will the mortgage be paid?
- What happens if you sell the home?
- What if the relationship dissolves?
By coming to an agreement beforehand, any conflict during a potential breakup could be settled without litigation or mediation.
No matter what your plans may be, we’re here to help! Contact a Mortgage Advisor today for more information.couples, Financing, First-Time Homebuyer, home, House, loan, ownership, title, Unmarried