How to buy a home with your boyfriend or girlfriend: Part 1
In this series, we explore buying a home with your partner (outside of marriage). Buying the home is only half the battle. It’s important to do your homework and take steps to protect yourself and your investment. Having a plan for your purchase will save you time and money. Establishing a framework for co-ownership will provide you peace of mind and limit risks.Unmarried couples buying homes together? Twenty-five years ago, buying a home with your boyfriend or girlfriend might have seemed taboo. “First comes love, then comes marriage, then comes the baby in the baby carriage” was the conventional thinking. Somewhere after marriage, many couples would look to buy a home. But times, they’re a-changin’.
Americans are marrying later: roughly half of all 25 to 35 year olds in the U.S. are unmarried. Even so, the majority of millennial renters say they want to own. In Seattle last year, nearly one in seven homes sold were to unmarried couples. It may be a case of “try before you buy”, or the phenomenon could be financially-motivated. One thing is clear: more couples are choosing to buy a home before getting married. And why not? Rents are sky-rocketing in desirable cities and suburbs, and many couples are keen to start building equity in a home.
At a recent CoBuy informational event, an attendee asked how the process of buying a home differed for an unmarried couple versus a married couple. The answer has its root in one key fact: unlike married couples,
couples who buy and own a home together outside of marriage do not benefit from the same protections afforded to married folks under the law.
That means that in the event of a breakup, the death of a partner, late payments, bankruptcy of a partner, or a number of other possible events, there could be unique implications for the remaining partner. Co-owning an asset means shared financial responsibility. In the absence of a marriage certificate, each party will want to protect their interests. Fortunately, you can take steps from the outset to address risks and protect against financial loss. This will have the benefit of both providing added security and giving peace of mind.
The Purchase Process is Only the First Step
Buying a home with your partner is best broken down into two parts:
(i) the purchase process
(ii) the co-ownership arrangement
Both of these deserve careful consideration and planning as they differ from the “traditional” case.
Your home is your castle, and homeownership is an emotive, personal experience. Often, we window shop online, then we visit homes in real life. It is common practice for folks to jump the gun on the search process only to fall in love with a home that they’re not prepared to place an offer on because they haven’t sorted out the finer details and/or they don’t have pre-approval. In competitive markets, the most desirable homes can be on the market for mere days. For this reason, it pays to have done your homework and prep ahead of time so that when you do find the perfect home, you’re in prime position to make a competitive offer.
Beyond the purchase process, you will want to consider the co-ownership arrangement. These are the things that come after closing. You should clarify ahead of time how to take Title to the property, individual rights and responsibilities, and how expenses will be divided and paid. Before the search commences, you should also consider what happens in the event one or both parties wish to exit the arrangement? For an investment that can put hundreds of thousands of dollars at stake, it makes sense to get it right.
Buying a Home Together: Four Keys to Getting it Right
In this mini-series, we’ll look at key considerations and steps unmarried couples can take to save time and money during the purchase process, as well as how they can protect themselves against downside risk, including:
Planning and building consensus: crafting a game plan will end up saving the time spent on the purchase process and maximize the chance of securing an ideal property in a competitive market.
Joint-financing: learning how to approach getting a joint mortgage, what lenders look at when making a decision, and tips for getting the most suitable terms.
Title & ownership options: discovering what Title means; what are the implications for co-owners, and why it’s important to select an appropriate format.
Preparing a co-ownership agreement: Drafting an agreement. What are the key elements of a co-ownership agreement? Why does co-ownership agreement make sense? What steps can you take above and beyond the agreement itself to provide protection and peace of mind.
We will speak to folks who have opted to buy together before tying the knot and hear about their experiences. We’ll also ask real estate professionals for advice on approaching the process. If you have questions you want covered, let us know.
This series is continued in Part 2: The Game Plan
For more info, check out CoBuy. Our online platform makes it easy to buy a home with friends, family, or a loved one. We guide you through the process from start to finish, assisting with planning, joint financing, and preparing a co-ownership agreement.