Should you be married before buying a house?
This is a question that more and more couples are asking as they consider the less traditional route of buying a home BEFORE getting married.
If you and your partner want to buy a home (but aren’t ready to marry), you aren’t alone in this decision. Unmarried couples who buy homes together are more common than you would think. The percentage of unwed couples who buy their first home together only continues to rise, 8% to 9% from 2013 to 2021.
That means that the number of unwed couples who buy homes has increased by 12% in the last eight years. This could be happening for several reasons. One theory that real estate experts suggest is the number of millennial homebuyers is on the rise. The millennial generation is more willing to live unconventionally, so it’s not a far reach to assume that more millennial couples are buying homes unmarried than in previous generations.
While owning a home together before marriage may be a good idea to save on rent prices and invest in real estate, there are also cons to this arrangement. Financial strain may cause more issues in your relationship, especially if you and your partner do not share the same account.
There are many more pros and cons to consider when thinking about the possibility of owning a home together as an unwed couple. So let’s talk about this more.
Before buying a home together as an unmarried couple, one of the first things you should consider is renting.
Renting is a great way to live together and test the waters without actually becoming committed to a home long term. And, with the current housing market being INCREDIBLY hot, you may want to consider if you can even afford a home in your area. To determine how much you can afford to pay for a home, Nerdwallet has a home availability calculator here. They also have a down payment calculator, which can be found here.
Additionally, if you plan to only stay in the home for a couple of years, or if your relationship can be rocky, you may want to consider renting vs. buying. With all the extra expenses that go into buying a home, such as closing costs, you will likely lose money if you only stay in your home for a couple of years.
However, if you and your partner are stable emotionally and financially and plan to stay in the same location long-term, buying a home instead of renting may be the best option.
Each couple will have to determine what is fair regarding whose name is on the title and how the mortgage and extra expenses are split. This can look different for each couple. Property rights can be divided differently when a couple purchases a home together. Let’s dive into this more.
There are three main ways unmarried couples can buy a home together:
Sole Ownership- One person in the relationship has the title and owns the whole property.
Tenancy in Common- Parties involved each have a separate title to a portion of the property that (in most cases) are not equal.
Joint Tenancy- Parties involved each have separate tiles of equal ownership of the home.
For example, if Lisa makes more than Billy, she might cover more of the expenses. And then the question may come up of who will own the home. Lisa may not think it’s fair that Billy wants to split ownership when he only pays 25% of the expenses. However, Billy wants to be on the deed because he’s afraid he will be left high and dry one day. Since he will be contributing what he can, Billy feels that he should also be on the deed. They may want to consider splitting the property rights based on how much they contribute through a tenancy in common arrangement.
When determining property rights, another thing to keep in mind is the credit score. If one partner has a much better credit score than the other, they tend to qualify for a better interest rate and can borrow more than their partner, who has a significantly lower credit score.
To start, know that marital status doesn’t matter regarding mortgage rates. Phew. Can you imagine that making a difference? However, there are more tax benefits for married couples who buy a home together than couples with a single status. For example, married couples can deduct more interest than unmarried couples on their taxes. Furthermore, since unwed couples have to file taxes separately, only one of you will be able to deduct the mortgage interest from your return if you plan to itemize.
Alright, so you are still considering purchasing your first home together, and you may even know how you will handle property rights.
At this point, it is likely the case that you think buying is a better option for you as a couple financially. So now it’s time to look at your relationship, how you will navigate the purchase of a home together, and what other things need to be considered. It’s important to sit down and discuss the important questions, ensuring that you are on the same page.
There are non-financial stressors that you will also need to consider before purchasing a home together. There are many cons to cohabitation if you are not emotionally ready to move in together.
First, consider whether or not you have previously cohabitated together. If you have yet to live in the same place, buying a home together may not be the wisest decision. In addition, if you don’t know how to handle each other when living under the same roof, you might run into issues when you do something you were unaware of. Some of these issues may be relationship deal breakers, such as one partner being far messier and perhaps even lazier than the other partner.
Good communication is also incredibly important. Resentment can build easily, especially when there is a lack of communication. Being unheard when facing new challenges as a couple who owns a home together may be detrimental to your relationship and finances. If you split, it may cause financial damage when figuring out what to do about the home.
Additionally, unmarried couples will have to do more to protect themselves legally just in case one of them passes away unexpectedly. Planning for the worst-case scenario is an unfortunate necessity to protect you and your partner as much as possible.
Buying a home together as an unwed couple can be tricky, and you will have to communicate about many things to get comfortable and feel safe in your new home. However, the benefits are also many and could be worth it.
For example, splitting the cost of a mortgage and down payment allows an unwed couple to afford a home that they might not be able to afford if they didn’t go in on a home together. Getting approved for a bank loan with two incomes is easier than with just one if you and your partner are both on the title. Additionally, couples who choose this route can save money by investing in a home versus wasting money renting if they keep the home long-term.
Buying a home together may also strengthen your relationship. While other relationships may fail after couples move in together, yours might only strengthen. It all depends on the couple and their willingness to communicate and compromise. Also, couples who share household responsibilities and bills typically do better than couples where one partner feels resentful because of an unfair workload or when a financial burden is placed solely on one partner.
Buying a home together is a huge commitment that should not be taken lightly. However, before making this huge commitment, it is important to follow the steps above to determine if it is the right time for you and your partner to take on such a responsibility.