While it may have been shocking as recently as 15 or 20 years ago, the “unmarriage” trend seems to be here to stay. According to a 2009 story by Lisa Selin Davis of Time Magazine, “more than 5 million unmarried couples cohabit in the U.S., nearly eight times the number in 1970, and a record-breaking 40% of babies born in 2007 had unmarried parents (that’s up 25% from 2002).”
Basically, couples are realizing they can still have all the trappings of commitment—children, a shared life, even the white picket fence—without actually taking the trip down the aisle.
Unfortunately, the legal aspects of buying a home together when you’re unmarried can be somewhat tricky. If you and your beloved are planning on sharing a mortgage but not exchanging rings, here is what you need to know to make sure your home owning experience is as happy as the rest of your relationship together:
Consideration for Home Buying When You Aren’t Married
1. A legal agreement is a must. When a married couple purchases a house together, there are certain legal protections that are automatically offered to them. For example, if one spouse dies, the ownership of the property automatically reverts to the surviving spouse. In addition, issues of who gets what percentage of capital gains and who will be responsible for what portion of the mortgage, taxes, utilities, etc, are also thornier when the owners aren’t married to each other.
Similarly, a married couple who divorces can hammer out the details of who will buy out the other spouse at the time of the divorce among other issues. Unmarried couples don’t have to go through a lawyer to split up, but that might make it harder to figure out how to split shared property.
Before paying closing costs and picking out new carpet, unmarried homebuyers should visit a real estate attorney in order to draw up an agreement together. This document should cover such issues as who is responsible for mortgage payments and bills, what will happen if one individual can no longer pay their share, what happens if one person dies or become incapacitated, and what happens if the couple splits up.
2. Make sure you can both qualify for the mortgage. While it is possible to put both names on a deed, even if only one member of the couple has the credit to apply for a mortgage, it can be a major issue to have the mortgage only under one name. If both partners don’t have the creditworthiness to qualify for a mortgage, then wait to buy a house together until both partners have strong credit. The one with good credit could otherwise be left holding the bag since theirs would be the only name on the mortgage.
3. Understand what types of titles there are. There are two ways that couples can own a house: by holding a title as joint tenants, which is how married couples are automatically titled, or as tenants in common. Joint tenancy means that each person owns the property equally, and ownership transfers to the surviving partner in the event death. Tenancy in common means that each person owns a percentage of the home’s assets—and those assets go to a deceased person’s next of kin, which very well might be parents or a sibling in the case of unmarried homeowners.
If you have a title as tenants in common with your partner, then you need to make certain that your estate planning is up to date.
The Bottom Line
Moving in with your sweetheart may be a romantic decision, but buying a home is a financial one. Even though it may feel uncomfortable to talk dollars, cents, and percentages when you just want to set up housekeeping, protecting yourself and your partner financially is more important than avoiding an uncomfortable conversation.