When unmarried and buying a home together, love may not be enough

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Published Date 6/7/2019

No married couple enters into the purchase of a home with the idea that they will break up. But life happens, and there are very clear laws that spell out the disposition of community property in the case of divorce. While these laws vary by state, they are intended to protect each of the home's owners when the union dissolves. Today, however, couples don't flock to the justice of the peace or stroll down the aisle to the altar in the numbers they used to. So what if you want to buy a home together and you're not married? What should you consider?

According to the most recent U.S. Census Bureau estimates that the proportion of young adults who live with an unmarried partner continues to rise. Among those ages 18–24, cohabitation is now more prevalent than living with a spouse: 9 percent lived with an unmarried partner in 2018, compared to 7 percent who lived with a spouse. In 2018, 15 percent of young adults ages 25–34 lived with an unmarried partner, up from 12 percent 10 years ago.

Lenders are often asked if it's a smart decision to start looking to buy a home if you are an unmarried couple. Perhaps you plan to marry or perhaps you want to get ahead of rising prices and interest rates. At any rate, you're ready to start your lives together in a place that doesn't belong to someone else. There are, however, some risks involved you should be aware of. Right off the bat, financial planners advise against it, according to an article in TIME Magazine: "Buying a home is often the biggest and most financially complicated move a couple makes, and unwinding it can be especially difficult for unmarried partners if the relationship ends."

In other words, love can sometimes conquer all, but it may fall short when it comes to buying a home together. You need legal protections should something happen to the relationship, even though it's uncomfortable to think about a breakup. Legal web site FindLaw says, "Unlike married couples, the property rights for unmarried couples are not afforded the same legal protections. Since this is the case, it's in each person's best interest to write out a property agreement that spells out who owns what and how the property will be distributed should the couple separate. This is especially important if a couple acquires real estate together."

A cohabitation agreement provides each person with some legal cover in case of a split, varying from state to state, so start with an attorney. Bankrate says there are a number of items that should be contained within the agreement, including type of ownership (joint tenancy with rights of survivorship or tenants in common), the percentage of the house each party owns, payment responsibility, a buyout agreement, job transfer protections, a spelled out dispute process and lastly, an exit strategy.

The only way to ensure you have an equitable right to your property is to make sure your name is on the title. MoneyTalkNews says it doesn't matter what verbal agreements were made or who paid the mortgage, so make sure both parties are named on the deed. How much do you know about your partner's record for financial responsibility? Is your own record squeaky clean? Checking each other's credit should give you each a good idea, but you can dig deeper and talk candidly about your individual philosophies on finances, committing to managing debt responsibly as a team. Start with your current expenses and scrutinize what debt you should pay off before committing to a mortgage. Your lender can help you carve the best path.

One of the leading causes of breakups and divorces is the handling of finances, and ongoing expenses are just one element of this. One of you may decide it's time to retire the older car and buy or lease a new one using credit, lowering his or her credit profile ahead of the home purchase. And many couples don't fully comprehend that owning a home means not only a down payment and closing costs, but property taxes and utilities, repairs and maintenance bills as well. Experts have studied how these are handled by couples and find they are rarely split 50-50, since one person may have more cash on hand and another may earn a higher salary, finding it easier to make mortgage payments. Student debt and credit scores are part of the snapshot as well.

NerdWallet says to approach buying a home together the way any engaged couple would and sign a prenup, specifying all the items just mentioned — all the "what-ifs" — instead of waiting to see what happens and hoping for the best. While it may put a damper on romance, you may (unfortunately) find yourself being grateful for it later on.

Source: RealtyTimes, USCensus, Bankrate, FindLaw, NerdWallet, MoneyTalkNews, TBWS

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