4 Things to Consider Before Financing a Home Together Before Marriage
The National Association of Realtors reported recently that close to 10% of homebuyers in 2020 were unmarried couples. This may be because rising rents and low interest rates make homeownership financially more attractive than living together in a rented home or apartment.
Buying property together prior to marriage, however, has challenges that smart couples tackle up front, even though it takes some of the romance out of making such a big commitment -- especially the part where you talk about what happens if you break up or someone dies.
Like any partnership, it’s critical to have a written agreement that spells out who is responsible for what today, and in the future. Having those tough conversations before buying the property will avoid a major headache should the relationship change.
We recommend working with a real estate attorney (who we can recommend) to create a property agreement that anticipates the many possible eventualities.
Some questions to think about:
• What is the ownership share for each partner? Is it 50/50 or unequal?
• Who is applying for the mortgage? If one partner has poor credit, this could be an approach to take, but it puts all the obligation for paying back the loan on the other partner regardless of ownership percentage.
• What is each partner’s expected contribution toward regular and unexpected expenses? (think: new roof, broken window, regular maintenance, etc.)
• How will you hold title on the property? The options are sole ownership (often riskier), joint tenancy (equal shares with right of survivorship), and tenants in common (probably the most common for unmarried couples, unequal shares OK). This decision is critical to think through carefully, and the outcomes are different if one partner wants to sell or passes away. And, the agreement should spell out what happens when you get married!
This gives you a taste for the detailed conversations the couple needs to have before making the commitment to buy a home together. Please contact us to talk about all the issues in more detail if you or any family members plan to take this step!
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