Mortgage Before Marriage: Everything You Need to Know About Buying a House Together
It’s a Millennial trend that’s been growing for several years now: buying a house together before saying, “I do.” More and more young couples don’t want to delay homeownership, despite waiting longer to get married, according to Business Insider. From a financial perspective, many couples would rather spend their savings on a down payment than a wedding reception totaling tens of thousands of dollars.
If you’re thinking about settling down with your boo boo without getting married, there are a few extra steps you’ll want to take to protect the investments made by both of you. Here’s what you need to know in order to start off on the right foot together during this exciting new milestone in your lives.
Can you buy a house with someone you’re not married to?
You can absolutely buy a house together before you get married (or if you have no intentions of getting married). Just like any other joint mortgage application, you’ll both need to qualify in terms of credit and income. The application is almost entirely the same in that you’ll provide supporting documentation to verify your employment and financials.
What is the difference between joint tenants and tenants in common?
The difference in your mortgage application process comes in when determining the type of title you both want for the property. Here are two of the most common options. Ultimately, you may wish to consult a lawyer to select the best title for your situation in accordance with your state laws.
When you have joint tenancy, you both own an equal percentage of the property. You can choose this option regardless of who paid for the down payment and how much. If you ever break up, you’ll both own the house and would equally share any proceeds of the sale. If one person dies, the surviving partner would assume full ownership of the home.
Tenants in Common
Unlike joint tenancy, there’s no automatic inheritance when you take title as tenants in common. If one partner passes away, ownership of their portion goes to whoever was listed in their will. If there’s no will, the share of ownership passes to their next closest heir, which won’t be the live-in partner.
Another difference with tenants in common is that you can split ownership in whatever percentages you’d like. So if one person made a large down payment or is responsible for the mortgage payment, they can keep a larger percentage of ownership if that’s what you both agree to. It is important, however, to get the full agreement in writing; otherwise, the state is prone to default to an assumption of 50-50 ownership.
Can you be on the deed and not the mortgage?
It is possible to both be on the deed when only one person applies for a mortgage. One popular reason for doing this is if one person has a better credit score and can qualify for a better interest rate (and ultimately, lower monthly mortgage payments). That person, of course, needs to have the income on their own to support the mortgage each month.
After the mortgage is closed, you can add the other person’s name to the deed in order to divvy up ownership in the home. Taking this extra step does allow you to ensure that full ownership passes to a surviving partner in case the other one passes away slowly.
Or when you go to sell the home, you’ll both legally be able to split any profits that are made when both names are on the deed, regardless of who paid the mortgage or down payment.
What tax implications are there when buying a house before marriage?
When you’re married, you typically file taxes jointly and can use any interest paid on a mortgage as a deduction (which is particularly useful in the early years when your monthly payments are very interest-heavy).
When you’re not married and buy a house together, some of these tax implications change. For example, if your name isn’t on the mortgage, you can’t use that home interest deduction, even if you contribute to the monthly payments.
Should you get a joint bank account?
Even couples who are getting married often debate how to join their finances when moving in together. If you’re not married, you may be particularly wary of combining your money with your partner. To make your life easier and more transparent, however, you could consider getting a joint bank account that’s just for shared expenses like the mortgage, utilities, maintenance costs, and other ongoing costs associated with owning a home.
Agree in advance who’s going to contribute how much and who is responsible for actually paying which bills. This gives extra clarity as you start to navigate this new level of intimacy together. Plus, you’ll avoid arguments over whose turn it is to pay the internet bill.
No matter how you set up your joint ownership of your new home, consult with a lawyer together to make sure you’re protecting both of yourselves in any potential future situation. In a best case scenario, you’ll live together in your home for many happy years. At the same time, you never know what unexpected hurdles life will throw at you, so make sure you’re prepared for the worst as well.