Unmarried couples have special needs when buying a house
Buying a home can have big benefits, ranging from a nest egg to being able to add personality to your living space and enhancing your home the way you choose to do so. But what are the best home buying choice for unmarried couples? Are there additional issues that should be considered before purchasing?
When a married couple purchases a home, there are benefits such as tax deductions and inherent legal protections for housing situations that may result from the relationship ending. With so many diverse lifestyles and relationship statuses, postponing a home purchase until marriage may not be the best choice. Unmarried couples can be afforded many of the same protections, but they aren’t automatic and require a bit more groundwork. Before you purchase a home while unmarried, consider these recommendations.
Decide who to name on mortgage and title
While this may seem cut and dry, choosing who will be named on the mortgage and title documents is a big choice if you are an unmarried couple. The title and mortgage are areas that don’t automatically afford unwed couples as many protections as married couples have. You need to fully understand how the mortgage and title work and who will own your property should less-than-desirable situations arise. Your title and mortgage company should advise you on the best choices regarding one or both of you being named on each document.
Consider situations such as what would happen if you should pass away and your partner is not on the mortgage or title? They may not be able to stay in the house or continue to pay the mortgage. Or, if your partner is on the title, but not on the mortgage, in the event of your passing, they would need to be financially stable enough to refinance the property in order to keep it.
Become joint tenants
Join tenancy is easy to achieve and can be accomplished by including a clause in the title to the property referring to a joint ownership. Owning a home as joint tenants shows commitment to your relationship and can strengthen the bond between you and your partner.
As joint tenants, you are both able to receive the equity of the
home in the event that you sell or need to take out a home equity loan. If for some reason the relationship does not last, both parties have legal proof to their shares of the property and neither can walk away leaving one person solely responsible for the property ownership.
Talk through scenarios & finances ahead of the purchase
Whether you decide to purchase a home together or rent, this step is vital, even though many couples fail to come together and sort out the financial aspects of their living situations.
Decide who will pay for obvious expenses like the mortgage, but also items like utilities, cell phones, home repairs, lawn equipment,
furniture items, etc. Consider if you will have joint checking accounts to pay for home items or if you will be paying separately for each of these items and what percentage you will each be responsible for. A great idea is to open a joint account with the purpose of paying all household expenses so it’s easily accessible for on-time payments.
Tax consideration
While married couples can file a joint tax return, unmarried couples must file separately and will need to figure out how to divide their tax benefits. If it will benefit one person to claim the tax deductions, the other partner should be responsible for fewer expenses or another advantage that works well for you.
Get legal
Like a marriage contract, a large commitment like a home purchase or
mortgage should have a similar legal document to go with it. Get a lawyer involved to protect all of the assets you and your partner bring into the relationship in the event that things end between you. There are documents such as a “domestic partner agreement” or a “cohabitation agreement”, but regardless, your contract should include how things like property, income and assets will be handled in the event that the relationship ends.