Modern Love: Unmarried and Buying a House

Modern Love: Unmarried and Buying a House

The face of modern love is ever changing–more and more, couples are living together for extended periods of time and choosing not to marry. For political, social, and personal reasons, many individuals make the decision to remain legally unmarried. But that doesn’t mean homeownership is out of the question. Though it may seem more difficult initially, it is certainly possible.

Many people do not even realize that homeownership is possible outside the confines of marriage–but many people are taking that option. Modern love and modern families are ever changing, and we’re happy that homeownership is happening in all of its forms!

Purchasing a home with your partner will require you to make a decision on who takes title–you, your partner, or both of you. If it is both of you, you have the option of being joint tenants or tenants in common. To answer your questions and make your transition a little easier, we’ve got some helpful definitions and explanations for you.

Sole Owner

You may choose to pursue homeownership with one partner as the sole owner of the home, which means that they are the sole owner of the home. As the legal owner, they’ve got full power to sell the house, will the house, etc. While another partner will be contributing to the purchase, there is no formal record of this.

One advantage to this form of ownership is tax savings. If one person has a high income and one person has a low income, the higher income person could be the sole owner and claim house related tax deductions. One might also pursue this option if one partner has bad credit.

Sole ownership is quite a risk though. It assumes that a all partners will be fair (even if they are no longer together) when it comes time to sell the house. If your partner dies and leaves the house to someone else, you’re out of luck. It’s possible to sue to reclaim losses, but it is often very difficult to win. If it is credit you are worried about, it may be possible to later add another’s name in an official capacity. This way, the person with the good credit will hold the loan, but the second person is added (though there may be some fees).

If one name is listed on the deed, you should sign a contract that details the property interests of all parties involved. Tax authorities don’t like off title owners, so make sure you’re working with a qualified attorney. You may not be able to deduct mortgage contributions or eventual profits from the sale of the property. You may also be required to to record the contract with the county Recorders office.

Joint Tenancy

Luckily, sole ownership is not your only option. If you acquire a title as joint tenants, you share the property equally and have a right to use it equally. Should one partner die, the other becomes the sole owner of the home, no matter what the will says. Joint tenancy makes the process of transfer following a death very easily, without the hassle of probate proceedings.

If one person sells their share, the joint tenancy ends (even if the other partner is unaware of the sale). The new owner and the non-selling original owner become tenants in common.

Joint tenancy works well for partnerships in which each tenant owns the same percentage of the home. It doesn’t matter how you decide to split up the mortgage payment or the down payment–joint tenancy simply means that you’ve agreed to own the property equally.

Some make a mistake in thinking that a joint tenancy is a substitute for a will–it is not. It allows you to pass a home to a survivor without probate, but it makes the home immediately half theirs, assuming you’ve changed the title to a joint tenancy before you die. This can have a negative impact on your taxes and if you end your partnership, they are still entitled to half the house. It’s fairly permanent and inflexible.

It’s a great option for some, but certainly should not take the place of a living trust or will. In joint tenancy situations, the partner would get the house and then the person designated in the will.

Tenants in Common

A very common way for unmarried people to jointly own a home is tenants in common. In this situation, there is no automatic right for property inheritance when one tenant passes away. Instead, this decision is left to the will. If there is not a will, the home will go to the living heirs, which does not include the living partner.

Tenants in common are eligible to own property in unequal shares, which is helpful when one partner contributes more. If your payment is owned in unequal shares, it is best to get it in writing and record the document alongside the deed with the County Recorder’s office.

The rest of it

Like most things, titles are changeable. You will need to fill out a variety of forms and pay some fines–but its doable. You can change a title if you feel you’ve made the wrong choice.

You might also consider registering as domestic partners to avoid some of the hassle.

While marriage is certainly not for everyone and you should make the decision that is best for you, it can be helpful for the homebuying process. Title and taxation will both be different (and easier) for married couples, and changing your status after you’ve purchased the house can be difficult. If you’ve discussed marriage, it might be easier to do it before you buy that house.

We know that the decision to marry is not to be taken lightly, so do not let home buying talk you into something you just aren’t ready for. Instead, focus on finding and making the best of the option that is right for you. Don’t be pressured by tradition of the way that others do things–to each his or her own!

(photo credit: yewenyi via photopin cc)

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The Young Wealth Team