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Barb and Ashley
Unmarried couples accounted for 16 percent of first-time homebuyers in 2017, the highest share on record, according to the National Association of Realtors. Single men and women accounted for a quarter of first-time homebuyers. Today, just 57 percent of first-time homebuyers are married, compared with 75 percent in 1985. The median price an unmarried couple pays for their first house is $177,000, according to the Realtors.
Most married couples simply take the title, “tenants by the entirety.” That wonky term means both spouses own 100 percent of the house. It’s harder for potential creditors to go after the property if one of the spouses is in serious debt (at least while the other spouse is alive) because it doesn’t belong to just that person. In addition, when one dies, the other surviving spouse immediately owns the dead spouse’s interest. But this title is reserved for married couples only. Unmarried duos will either have to use a so-called “joint tenancy with rights of survivorship” or “tenancy in common” title.
The main question you should ask is, “If one of us dies, where does the house go?” If it should go to the other partner, “joint tenancy” makes sense, but if it should go to one of the girlfriend’s children, “tenancy in common” is typically better. No matter how you take title to the property, if you’re both on the deed and take out a mortgage, and if you both sign the note, you’re both held “jointly and severally” responsible for the mortgage. The banks don’t care if he owns half the property and you have decided to split the bills, the banks will hold you both responsible, individually, to pay back the mortgage — all of it.
Unmarried couples should have a meaningful conversation sooner rather than later about how the house will be split and who will pay for what. When they have that discussion it can be very revealing of how strong that relationship is. The easiest way to sort out these logistics is through a handshake, but couples would be wise to get their the agreement in writing (most real estate lawyers can draw up these agreements). It can also be specified on the deed that, say, one partner owns 70 percent of the house and the other owns 30 percent.
Taylor, a homeowner in Connecticut, decided to have a legal document drawn up in case their relationship went south. It specified that since she had contributed more than her boyfriend to the house’s down-payment, she would also receive more of the house’s value should they break up. They also agreed to switch off making their monthly mortgage payments. “I never thought we’d have to use it,” Taylor said. “It was more of a worse-case-scenario piece of mind.”
Still, if you and your partner decide to part, the situation is likely to become messy no matter the precautions. It could lead to a battle royale as to who put in most of the money and how much each would be entitled to in the event of a sale. In this case, it would be helpful if there were records of all payments throughout the ownership: canceled checks, monthly bills, spreadsheets and tax returns. In the end, you’ll both have to put the house on the market or one will have to buy it from the other, potentially picking up legal fees and transfer taxes along, of course, with the cost of the partner’s portion of the property at the time.
Buying a house on your own? You won’t need to struggle over questions of ownership or make any compromises. But being on your own as a homeowner has its own challenges. Your financial picture alone will need to be sufficient to secure a mortgage. Single women pay a median price tag of $154,000 for their first house, compared with $145,000 for single men, according to the National Association of Realtors.
Single homeowners need to make sure they’ll be able to cover all of the myriad and sometimes unexpected costs of owning property. Since there is no automatic transfer of the property to a spouse after the property owners’ death the need for a will is at its greatest. If you want it to specifically go to your sister or brother, it should go in writing, and that writing should be a will. Single people looking for a house may want to know that they could rent out the property if they decide to move because of a change in life status. It is a good idea to check what the rental value is and that you’re allowed to rent.