Just about every financial planner advises against purchasing a home before officially getting hitched. However, with rental rates skyrocketing, and access to lower mortgages today than ever before, many couples are considering the act of purchasing a home together as a great idea. Usually, it does not end in a fairytale. Buying a house is actually difficult even when you are married; so when you aren’t, it complicates matters even further. If you break up, you’re not only dealing with emotional heartache but also financial.
If you are already considering this, you hopefully should have already discussed details regarding your credit score, income, and savings to see if you can afford to buy, but more importantly, to calculate risk. If your significant other’s credit score is bad, and things go south in relationship fairytale land, you could end up with a bad credit score, too, after its all said and done. Plus the fact that their credit score will determine whether or not you can even get a mortgage, and the interest you’re going to pay if you can. It’s also going to dictate how the property will be titled, and who’s name will be on the mortgage loan.
You should definitely consider opening up a joint bank account. That way, you can use it to pay for taxes, insurance, repairs, utility bills, and the mortgage. This agreement is certainly going to have to be put into writing. Called a cohabitation agreement, the document will outline all of the details. These might include how the mortgage will be split, what will happen to the house if you break up?
The house must also be titled correctly. There are a few options. One can be the sole owner, both can be on it as joint tenants, or, you can share the title as tenants in common. Usually, both parties want to be on the title. If not, the one left out of the title leaves equity out of her own investment. Be aware that if one party dies and both are joint tenants, that the rights to his or her share go to their heirs, not you. So..hopefully you like your relatives! This is why if you are considering buying a house together you must consult with a real estate attorney. Little details like that are huge, and could actually leave you homeless in the event that something happened.
All in all, while buying a house together before marriage is typically not the way to go, if you are going to, be sure that you are protected. Get legal advice before making any decisions, and also throughout the whole process.