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Getting ready to buy a house

Unmarried couple buying a house? Protect yourselves with these tips

By Julie Tramonte

February 2021

Let’s say you and your partner are talking about buying a house together. Interest rates are low, you need more space and you’re tired of throwing money away on rent. Besides, you reason, you’re committed to each other and it makes more financial sense to buy a house now than spend money on a wedding. So, yes! Let’s start house shopping! 

But before you rush into anything, take these steps to protect yourselves. You and your partner can face additional financial risks as an unmarried couple without some of the legal protections of marriage in various states. It may not be romantic, but it’s important to talk through the legal and financial ramifications of buying a house together.

Hope for the best, plan for the worst

Taking this step in your relationship is exciting but keep in mind: 39% of marriages end in divorce. (Sorry for the buzzkill.) And the number of breakups is probably higher for unmarried couples. If you break up, who gets the house?

Here’s another buzzkill to consider: If you or your partner should die unexpectedly (hey, it can happen!), will the survivor get the house? State property laws dictate the rights of parties who are married when it comes to divorce or death – but unmarried couples need to be a little more careful about planning for unpleasant outcomes.

Get it in writing

It’s important to back up your worst-case planning with legal documentation – much like a prenup agreement helps to control the fallout from a divorce. It’s no different than having a medical or auto insurance policy that provides protection for the unexpected.

Ideally, you should get proper legal advice from a real estate attorney. (I know, easier said than done when you’re scraping together a down payment.) But there are plenty of resources, like this book that offers guidance and downloadable contracts, such as a cohabitation agreement, that you can use to protect yourselves.

Who’s on the mortgage? Who’s on the title? What’s the difference?

One of the things you and your partner will have to discuss is who will be listed on the mortgage (the loan you are legally bound to repay) and who’s on the title (legal document that lists ownership). The names listed or omitted on either document have very important ramifications.

These are the 3 most common ways ownership can be listed on the title:

  • Sole ownership – only one name is on the title, and that person has full ownership and responsibility for the home
  • Joint tenancy – both names are on the title with each having a 50% share of the home; if one dies, the other 50% of ownership automatically goes to the surviving owner
  • Tenants in common – both names are listed on the title, but each owns a specified percent of the property (not always equal). If one dies, the deceased owner’s heirs inherit their share of the house instead of the other owner (unless specified in a legal document)

Typically, you should avoid having someone’s name on the title if they aren’t on the mortgage. Why should they own part of the house if they aren’t paying for it? On the flip side, you don’t want to be listed on the mortgage but not on the title. You would basically be financially responsible for a home you technically don’t own. 

Everything isn’t always clear cut

My friend Alexis and her boyfriend bought their home in 2018. They were going to split the down payment and have both names on the mortgage and title. Unfortunately, her boyfriend had a low credit score from a small unpaid medical bill from years ago. (Read why your credit score matters.) Since lenders use the lower credit score on the application to determine credit risk, Alexis and her boyfriend opted to only list her on the mortgage to qualify for a better interest rate.

But Alexis felt it would be unfair for her boyfriend to pay half of everything but not be considered half owner, so she included him on the title. Nice, but as mentioned above, that put her in a vulnerable position in the event of a breakup. To provide some legal protection, they obtained a notarized Contract for Equal Ownership of a House. 

And since purchasing the house, her boyfriend’s credit score increased dramatically and interest rates have remained favorable, so they’re refinancing to put both names on the mortgage.

Talk to your partner now

If you’re planning to buy a home with your partner, have a frank discussion before you start house hunting and get caught up in the rush of offers, counteroffers, inspections, appraisals, movers, etc. Yes, it can be awkward figuring out things like, who pays for repairs? what if one of you loses your job? will you share in the cost of home improvements? and who claims the mortgage interest on their tax returns? But making those decisions now – and legally documenting them – can save you future headaches and hardship.

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Julie

Read more articles by Julie
Julie Tramonte is a writer who joined MGIC in 2018. Prior to flying the coop, she wrote for a mattress company, a manufacturer and advertising agencies. She’s obsessed with reading, traveling, tennis and rearranging furniture. Mother of 2 beautiful, adult daughters. Empty nester who recently downsized. Her guilty pleasures are doughnuts and the Kardashians (don’t tell anyone).
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