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What Unmarried Couples Should Consider Before Buying A House Together

Felix Homes

Jan 8th 2021

One of the most polarizing topics in real estate is the 'should unmarried couples buy a house together' debate. There are two different opinions here, and for good reason. This answer isn't black and white, but we'll dive into some of the commonly asked questions and review a pros and cons list below!

Can You Buy A House With Someone You Aren't Married Too?

An unmarried couple can certainly buy a home together, and people do it all the time. It's not uncommon for unmarried couples to buy a home together, as there are many benefits of homeownership. In fact, you don't even need to be a 'couple' to buy a home. Often times, friends will purchase a house together as an investment property.

Why Would An Unmarried Couple Consider Buying A Home Together?

There are many reasons why a couple may want to buy a home together. Here are a few of the most common reasons:

Rent can be expensive

If two partners are renting their own home/apartment, this can get rather expensive quickly. Keep in mind, many couples choose to spend the night at one another's home most days of the week, so one may find themselves paying for rent on an apartment they don't spend much time in. This may seem wasteful, and combining incomes/forces may appear to be the smart financial move.

Smart financial decision

Couples believe buying a house together is a smart financial decision. After all, the sooner a home is purchased, the quicker you start establishing equity in the home and begin laying a financial foundation for your long term future.

Sense of independence

Couples are getting married later in life, but there is still a desire to move out of their parent's house as quickly as possible. Many people believe renting is simply throwing money out the window, and as a result, they want to purchase a house as quickly as possible.

Mortgage pre-approval

One partner may be interested in buying a house but may not have a great credit score. A mortgage lender may be more willing to lend money to an individual if they have a co-signer. The significant other may be the most logical co-signer option. By using a co-signer, the bank will feel more comfortable lending money despite the initially low credit score.

Whether for financial reasons, social reasons, or to begin laying a foundation early, more and more people are electing to purchase a home before marriage in today's age than ever before.

What To Consider Before Buying A Home Together?

If you're not married, and you're thinking about buying a home with your partner, there is a lot to consider.

Spend time living together first

First and foremost, you will want to be sure you can live together as a couple. If you're currently only spending 2-3 nights together per week, consider ramping that up before you purchase property together. Living with someone full-time is certainly an adjustment and you should get acclimated to this before making a major financial decision such as buying a house together.

Consider why you're looking to buy a house together

If it is to save money, you can still do this while renting. Instead of both parties paying rent for their own apartment, considering moving into a larger apartment together as a middle ground between your current state and homeownership. This doesn't need to be long term, but a year or two under your belt certainly won't hurt.

Consider your long-term goals

If you're looking to buy a home to live in for the next year or two before moving onto something else, you may want to hold off and continue renting. Owning a house for less than two years typically isn't a great financial investment.

Understand the responsibilities of homeownership

Buying a house is often more than just a financial decision. Homeownership is a lifestyle, there's a lot that goes into owning a home. There are legal ramifications that could become present, additional responsibility, and significantly more work.

Who Claims The House If We're Not Married?

Unmarried couples may have concerns when it comes to taxes. If one person owns the property and is the only name on the mortgage, they are the one that can claim the house on their yearly tax return. It doesn't matter if the house is being paid via a joint bank account that both partners contribute to.

If both people own the home equally, the unmarried couples or individuals can only claim the portion of property taxes, or interest, they actually paid. The full interest expense deduction can not be received by both parties.

A married couple tends to file jointly, which would eliminate any confusion when it comes to claiming this benefit.

Can You Get A Mortgage With Someone You're Not Married Too?

Yes, you absolutely can and it is completely legal. This does not only apply to couples who are in a relationship together. Business partners, friends, and colleagues may choose to purchase a home together for various reasons.

The bank's primary concern is to ensure their loan is safe and the borrowers will repay the balance plus the interest expense. Banks are designed to view things through a financial lens and are not designed to judge your relationship or marital status. The reality is, married couples can also get divorced, which is a risk a bank takes all the time.

Can Someone Be On The Title And Not The Mortgage?

Understanding the title and mortgage breakdown is critical. There are various ways/reasons why someone may be paying for the mortgage, but not on the actual title of the property.

For example, imagine if John purchases a home before meeting Susan. The title and mortgage would be in John's name entirely. However, once the relationship gets serious and the couple decides to use a joint bank account, they both may be contributing to the mortgage equally each month. Just because one partner is paying a portion of the mortgage does not mean they have ownership rights to the home. If their name is not on the title, they do not own the home.

Following the above example, if John and Susan break up, Susan can technically be homeless despite all her contributions to the mortgage over a period of time because she does not legally own any portion of the home. John has sole ownership of the home.

If the above example concerns you, and you're not willing to contribute to the mortgage unless your name is on the title, you and your partner should consider various other refinancing options to get your name added to the title.

Alternatively, your name can be on the title but not the mortgage. A couple may decide it's easier to just have one name listed on the actual mortgage, but both names may in fact be represented on the title. In this case, the person who signed the mortgage is obligated to pay the mortgage lender, but both parties can legally have joint ownership of the property.

What Happens If You Own A House With Someone And You Break Up?

The risk of break up is one major deterrent an unmarried couple must consider. If the couple was simply renting separate apartments, it would be pretty straight forward. Each partner would return to their apartment, and carry on with life post break up.

However, when you own a home together, things get a bit more complicated. After all, if you're both on the mortgage and title, it is both of your responsibility to continue paying for the home. The two most common outcomes of this situation are:

One partner buys out the other partner

If homeownership is split 50/50, one partner could buy out the other partner through a refinancing deal. Generally speaking, to successfully buy out the other party, one would need to buy out the other party's equity accordingly. For example, if $300,000 is owed on the mortgage, but the house is worth $350,000, there is $50,000 of equity in the home. If each party owns an equal share of the home, each party would have $25,000 of equity in the home. The home can be refinanced into one person's name, but the party parting ways with the home will want to make sure they get their fair cut of the profit!

Sell the property and split the proceeds

Both parties choose to sell the property entirely and walk away from the home. Again, the same principles apply here where each party will want to make sure they get their fair share of equity after the sale of the home.

The above options are the most common ways to manage a property owned by an unmarried couple that just broke up, but both options certainly present their fair share of challenges. Breakups can be ugly, and people can be selfish and stubborn. Often times, each partner will need to be represented by legal counsel to ensure they are getting their fair share of the money, and one is not taking financial advantage of another. This can make the sales process a bit more time-consuming, and often more expensive considering the legal cost.

What Does Tenants In Common Mean?

Tenants in common is often referred to as TIC. Tenants in common is when two or more parties share ownership rights on a particular property. Tenants in common does not mean the property is split equally. Each owner may own an equal, or different percentage of the home. For instance, person A may own 60% of the property, whereas person B owns 40% of the property. When an owner dies, the ownership percentage is passed onto the deceased tenant's estate. One owner may choose to buy out the ownership percentage from the estate, or they may continue to keep their share of ownership the exact same.

No one person can claim full ownership of the property or parcel of land in a TIC agreement. All areas of the property are owned equally - in other words, no specific owner can claim ownership over any specific part of the property or piece of land. The ownership or interest in the property may change between parties, but it does not provide anyone with exclusive or favorable rights to any part of the home or property.

Thinking About Buying A Home?

If you're thinking about buying a home, whether you're a married or unmarried couple, there are a few things you may want to consider before even getting started with the experience.

Work on your credit

Work to pay off your debt, and credit cards, as quickly as you can. The more debt you have, the higher your debt-to-income ratio will be which can impact your ability to qualify for a mortgage. At Felix Homes, we would recommend setting a strict monthly budget and using your savings to pay down any high-interest debt such as credit card bills, car loans, and student loans.

Save up for a downpayment

Make sure you have enough money to cover your down payment. Depending on which financing option you choose, you will typically be required to put down at least 3%. If you want to own a home in the near future, the sooner you can start saving for a downpayment, the better.

Figure out the details

Consider whose name the home will be under. Will the home be jointly owned, or will there be a co-owner? Start thinking about these options now even if you are married.

Set a budget

Determine what your comfort level is with mortgage payments. Just because a bank approves you for a $2,000 monthly mortgage does not mean you need to take it. Perhaps your comfort level is $1,400.

Come up with a plan

Consider using a legal written agreement with your partner if you're not married. Lawyers have experience crafting such agreements and although it seems like a pessimistic step, it can be a financial lifesaver.

How Can Felix Homes Help?

Felix Homes is a Nashville-based real estate brokerage servicing middle Tennessee. We have one simple mission - to be the most financially responsible way to buy or sell a home.

We make our mission possible by not only charging a low commission fee on both the buy and sell side of the transaction, but our brokerage also has a fundamentally different business model when compared to traditional brokerages. We are a tech-enabled real estate firm and instead of having independent contractors agents, we have full-time employees who specialize in specific tasks such as marketing, finance, photography, technology, and of course, being a real estate agent.

Don’t be mistaken, a discounted price doesn’t mean a discounted service. We are a full-service brokerage! Our agents' only job is to focus on you, the client. Our average client keeps an additional $8,100 in their pocket after they sell their home using our low commission model. If you’re interested in hearing more or need any support on any real estate matter, we can be reached at contact@felixhomes.com or 615-354-5731.