Marriage just isn’t what it used to be. The institution is essentially the same, but the allure has gone. People are marrying less frequently, and younger generations place less importance on getting married than any before them.
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But like it or not, the idea of marriage is built into our society – and our financial structures. Making joint financial decisions, like buying a home, is always going to be a little trickier for couples who forego the altar.
That doesn’t mean it’s impossible, though, or even that difficult. Unmarried couples looking to jointly purchase a home simply need to take some factors into account that their married friends do not.
Here are some best practices for buying a home when you’re not married – including how to protect yourself if the relationship doesn’t work out.
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Put Both Names
Both names should be on the mortgage and the deed. If one person moves out and their name isn’t on the mortgage, they have no legal obligation to continue making payments. This can leave the other person stranded if they’re unable to make payments by themselves.
Having both names also stops one party from kicking the other out without a place to live. You can choose to have both names as joint owners on the title or as tenants in common, the latter of which allows one buyer to own a greater portion of the home. This is useful if each person contributes a different portion of the down payment or pays more of the mortgage.
Consider All the Costs
Owning a house is like having a pet: something expensive can – and usually will – go wrong. Some experts advise saving between 1-4% of the mortgage every year for repairs and maintenance fees. Each party can contribute this amount into a joint bank account that’s designated as a home emergency fund.
Preparing for this in advance prevents one person from paying for all the repairs, only to get stiffed on repayment by the other party.
Houses require other costs beyond regular maintenance and surprise repairs. Utilities are often subsidized by landlords when you’re renting, and the full cost may come as a surprise to first-time homebuyers.
Make It Legal
You can still set up a contract binding both of you to the house, even if you’re not married. For example, the contract can stipulate who may live in the house if one of you decides to end the relationship. It can also provide contingencies on what to do if one party wants to sell the house while the other wants to keep it.
These agreements can be awkward to discuss, but doing so when the relationship is in good shape ensures both parties are protected equally if the situation changes. You should note how much of a down payment each party contributed so that equity can be divided appropriately later. When dividing any property with another party, appropriate documentation can make the difference between a fair split and a contentious legal battle.
Choose a House Each Can Afford
Should one person decide to leave or break up, the other party could be on the hook for the mortgage. The safest way to buy a mortgage with a non-spouse is to buy a home each person can afford individually. If one person loses their job, or if the home fails to sell quickly, the other person can continue to make payments to prevent foreclosure.
Having a house both can afford also makes it easier if there’s a disagreement about selling or staying. The parties involved can divide the remaining home equity equally, and the interested party can keep their home.