When you’re in love, it’s easy to see the future as a straight path—one that might include a cozy new home for the two of you. But what if things don’t end up working out? If you’re married, you’ll have a host of legal protections. If you’re not married, though, you don’t have those. And this situation is more common than you might think; according to Tim Grant of the Pittsburgh Post-Gazette, unmarried couples own 8% of the housing in America. So if you’re buying with a partner you’re not married to, I urge you to sit down and look at three issues:
1. What You Own
Is the house or apartment going to be in your name? Your partner’s? Both of yours? You have to consider who has ownership rights—i.e., whose name is on the deed, the piece of paper that establishes your right to the property. I recommend, for your protection, that you always get your name on the deed when you’re buying a property. This sounds basic, but it’s very important. Don’t just listen to me, listen to my mortgage expert, David Breitstein of Apple Mortgage Corp., who argues that getting your name on the title to the property is just common sense. “Who’s going to say, “I’m going to help make the payments, but if we break up, I want you to be the only person who owns it? The exception is if you’re buying a co-operative apartment. In that case, the co-op board has discretion over what names to put on the ownership documents, which are known as the “stock and lease.” So before you buy, ask the board!
2. What You Owe
Who is going to apply for the loan? If one of you has good credit and one has bad credit, the mortgage bank will price the loan based on the lower credit score, notes Breitstein—which could cost you thousands of dollars. On a $400,000 loan, for instance, dropping from a 740 credit score to a 620 could raise your interest rates by a full percent. On the other hand, if you’re partners, I think you should both be responsible for the debt. So here is my advice: If one of you has a really lousy credit score, raise it before you buy. A separate issue that you’ll want to talk about is who will make the payments. If one of you makes more money than the other, you’ll have to discuss whether you’re paying the mortgage 50/50, or whether the person who makes more is going to contribute more. I know it’s not a romantic conversation, but trust me, it’s a necessary one.
3. How It Works If Everything Goes Wrong
If you break up, will you sell the property and split the proceeds? Or rent it out and split the rent? Or will one of you buy the other one out? As someone who has BTDT (been there, done that!), let me tell you, the time to work this out is before you start fighting. Also make sure that you have protection in case one of you dies unexpectedly—you don’t want your partner’s parents, who aren’t even your in-laws, suddenly owning half your house and tell you that they want to sell it. You can write fairly simple wills leaving your shares in the property to each other. Also, when you buy a home is a good time to take a look at your life insurance needs as well.
Have more questions? David Breitstein can be reached at email@example.com.
Tell us in the comments: Have you ever copurchased a home with a significant other instead of a spouse? How did you work out the logistics?