Home buying advice for an unmarried couple

An unmarried couple sitting on the floor in front of moving boxes.

Home buying is an exciting journey, and it’s a privilege to share that excitement with a partner. A lot of planning is required if you are buying a home as a couple and a little more if you are an unmarried one.

A significant part of the plan will involve discussing the responsibilities and liabilities of you and your partner after buying the house.

You get a plethora of options if you have already taken the wedding wows. The mortgage and possession terms and conditions are standard and straightforward for legally married couples. But, if you haven’t tied a knot or living as common-law spouses, you may face a few challenges in purchasing your cozy nest.

In this guide, you’ll learn how to overcome those challenges. We also recommend various home options available to you in your area. Click here to learn more.

There are several benefits to purchasing a house before getting married. It is financially rewarding; you can enjoy the cohabitation lifestyle, save yourself from the hassles of paying monthly rentals and combine your income and efforts towards owning your property. Purchasing a house together can prove to be a great investment in the future.

However, staying in that setup becomes awkward and stressful if your relationship ends. It also becomes financially difficult after you split up and you have to figure out what to do with the house before parting ways. Most couples sell it off and divide the investments. You can also choose to buy your partner out of the property or rent out the house.

You need to discuss four things with your partner before buying a house as an unmarried couple.

How will you pay the mortgage?

In Canada, a mortgage application follows a standard protocol, terms, and conditions irrespective of your marital status. The lenders look at your combined income, credit score, and asset-to-debt ratio.

Getting a mortgage is crucial and involves great responsibility. Since both your names appear on the mortgage papers, you are both liable for repayments. It can look effortless and promising when you are in a relationship, and both of you are capable of repaying the mortgage. But What if one of the partners stops earning and fails to pay the loan? What happens if your relationship ends and you decide to part ways? One partner’s exit can make it difficult and expensive for the other to carry on with the mortgage.

Many real estate experts advise unmarried couples to avoid buying a property for the problems mentioned above. But, if you insist on co-living with your partner in your own house, experts recommend that you get transparent with each other about your income, savings, debts, and credit score.

You both deserve to know your combined strength and the challenges of mortgage repayment before applying for it. If your partner isn’t comfortable sharing these details with you, think twice before buying a house together.

Who will own the title?

House ownership is another significant decision you both have to make before signing a deed.

When married couples buy a house, they own the property jointly. If one partner dies, the other automatically acquires the title as the sole owner of the house. And during a divorce, the partners have equal rights on all marital property, including home.

As an unmarried couple, you have a few options available. You can choose to share the title jointly as married couples. Or you can register the house in the name of one partner, which means that the titleholder has all the rights to the property. Under this arrangement, despite co-signing for the mortgage, the other partner will have no property ownership rights; and will only be liable for the loan repayment.

As an unmarried couple, don’t share the property title if only one partner is liable for the loan repayment. Ideally, one who takes the financial risk should own the house.

What will be the terms of the cohabitation agreement?

As a couple, you may not be very comfortable signing a cohabitation agreement, but it is advised that you do. This legally binding contract is crucial and practical in setting realistic expectations and responsibilities between you two. It contains details about your bank accounts, credit card statements, tax returns, and other finances. It also includes details about your shared liabilities and expenses. How much will each partner pay towards the loan and other household expenses? Who will have the rights on the property and other assets? And most importantly, how will you split at the time of breakup?

It can be a significant step in determining if your partner is interested in sharing the liabilities and expenses. If you both don’t agree to the terms and conditions of the agreement, this may not be the right time for you to buy a home as an unmarried couple.

What will happen in the worst-case scenario?

By worst-case scenario, we mean the death of one partner. Too often, couples ignore this possibility and plan only for the breakups and separations.

If you own the house as tenants in common, the deceased partner’s ownership will not pass on to the other partner unless written in a will. In the absence of any declaration, or if the deceased partner named someone else in the will, those heirs become co-owners of the property. Or the property is governed by state intestacy laws. It creates a challenging situation for the surviving partner as they have to share the house with someone they never wanted to.

Therefore, you must warmly and carefully discuss this scenario with your partner and take a lawyer’s help in writing a will.

Property lawyers advise unmarried couples to take time and understand all the legal requirements and challenges of buying a house. They suggest you work on your finances and consult a reputed realtor to guide you throughout the home buying process. It is a big decision. Therefore, commit yourself, discuss the future and avoid taking steps that may jeopardize your relationship with your romantic partner or give you financial and emotional stress.

Remember that communication is the key. As partners, you must not assume the status quo and discuss your expectations with each other at each step.

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