Home buying for unmarried couples and friends doesn’t have to be scary
Whether you’re planning to walk down the aisle in the future or not, home buying for unmarried couples and friends can be a tricky situation. Nonetheless, more and more couples and friends are opting to do just that as rental prices throughout the country skyrocket. In fact, one in four millennial couples between the ages of 18 and 34 have recently purchased a home together before marriage.
Even if it makes financial sense, home buying with a partner or friend is one of the biggest – if not the biggest – transactions you will ever make. Keep yourself from potential problems down the line by following these important tips.
Know each other’s financial history
Home buying for unmarried couples and friends is a business transaction, which makes your significant other your business partner. You wouldn’t enter into a business deal without knowing the financial strengths and weaknesses of your partner, would you? The same applies for your home purchase. If you’ve put off discussing your personal finances, now is the time to do it. Share your credit history and credit score with each other. Even if one person has excellent credit, it’s the lower score of the two that will determine what kind of loan you qualify for and the interest rate you receive.
Home buying for unmarried couples is serious. Decide upfront how to handle costs
If you are both listed on the mortgage, you are both equally liable for that debt. Even if the other person walks away, you’re still on the hook. Will you be able to afford payments on your own? You may want to consider only taking out a home loan that you can reasonably afford with just your income.
In addition, have a candid conversation about who is going to pay what. How much will each of you contribute to the down payment? Who will pay the mortgage, taxes and utilities? How will maintenance costs be shared? You may want to consider opening a joint bank account from which all common bills can be paid. Discuss how much each will deposit into the account monthly. Home buying for unmarried couples and friends, can lead to unforeseen issues if everything is not talked about opening, and planned ahead accordingly. Consider talking to a real estate attorney or financial adviser. They will have experience in guiding you down the correct path, and ask you questions that really need to be known upfront.
Have something in writing
We all want to believe that our story will have a happy ending – but that isn’t always the case. While it can be an uncomfortable conversation, you should put in writing what will happen should your relationship end. Talk through possible scenarios such as what happens when one person loses a job or dies. Come to an agreement on how you would like to handle each situation and put it in writing in a legal document. This will help avoid costly litigation down the road.
Consider your title options
You and your partner can either hold title as joint tenants, where the property is owned equally and full ownership is transferred to the other upon death. Or you can hold title as tenants in common, where ownership does not automatically transfer if one person dies. This is a good option for those who may have kids from previous marriages and want to designate a certain percentage of the home’s assets to their beneficiaries.
Buying a home can be complicated — doubly so if you are buying as an unmarried couple. Follow the tips above and enlist the help of a real estate professional with expertise in this area to help guide you through the process.
Home Buying for Unmarried Couples and Friends can be a win-win
Home buying for unmarried couples and friends can help your long term financial goals. Marriage is not always an important factor. It is a legally binding agreement, just like a mortgage. Just go in prepared. Get advice. Why rent, when you can own. Follow the information above, ask as many questions as possible, and really have an open discussion with your partner.
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