As the definition of partners in our society start to gather a broader meaning, and also as people find co-habitation to be a more comfortable arrangement than marriage, considerations for protection of assets when making a large purchase, such as a home, require greater attention. So much attention is given to getting the house, and setting up the home and thoughts are seldom directed to protect the owners in the event of a break-up. The laws in each state may vary, and in some states common law is acceptable, however the dissolution of assets is always a matter of fairness. Married couples, with high financial exposures will write a pre-nuptial agreement, but seldom do unmarried partners give this the consideration it deserves.
Unmarried Women: Many young, unmarried women, know the value of a long-term real estate investment. What they do not consider when deciding to buy a home with a special partner, is in the event of a break-up, how would they reap the profits of their investments. In the end, not only can they lose at love, but they can also lose their largest investment: the house itself.
With interest rates still low and home prices soaring, more and more couples are committing to home ownership before committing to marriage. But there are special considerations involved in the purchase of a home for an unmarried couple, and couples should be aware of their rights, if something goes awry. Unmarried couples buying a home together should have the equivalent of a prenuptial agreement.
According to the National Association of Realtors, 8 percent of U.S. households were owned by unmarried couples in 2003, up slightly from 2001. But research from the Centers for Disease Control and Prevention's National Survey of Family Growth shows that almost half of cohabitations break up within five years. Even though young partners intending to wed feel comfortable with each other, it would be wise to meet with a lawyer and draft a document similar to a pre-nuptial agreement that would protect both parties in the event of a breakup. Many couples feel that as they are engaged and all the dates have been set, that they do not need to pay attention to this detail.
If the relationship does sour, the partners, or at least the primary mortgager would be able to recover their individual contributions to the down payment and closing costs, as well as some money put towards renovating the house. If no precautions are taken, monies paid towards the mortgage and monthly expenses are lost. To protect their assets, unmarried couples should consider legal documents such as a pre-nuptial document which would protect both parties when they part ways.
But there are other steps couples also should take before plunging into home ownership. First, couples interested in buying a home need to realize they are making a commitment to one another, even if they don't intend to marry. Buying a house can be a bigger commitment than marriage. Home ownership is a long-term commitment and can lead to big problems if a couple is not secure and confident in their relationship said.
Fortunately, for couples ready to settle down, being unmarried does not present huge barriers when it comes to financing a home. Couples are often surprised to find out that buying a house is within reach. Mortgage lenders do not tend to be concerned about the marital status of their clients as long as they can pay their bills. But marital status can affect eligibility for some of the perks available to home buyers.
Military couples: There was the case of a Gulf War veteran from Phoenix, who decided to buy a home. He looked into a loan program sponsored by the Department of Veterans Affairs. Because he was applying for a loan with his partner and she was not legally his spouse, they were considered ineligible.
Lawyers agree it is important to have both names on the deed of the house if the un-married partners intend to own it jointly, even though sometimes a couple can get a better deal on a loan if there's only one person on the mortgage. Putting just one name on a title can get some couples a better interest rate on their mortgage, especially if one of the partners has bad credit. In this scenario, however with just one person's name on the deed, even though they may split the household bills equally, one of the partners would have no legal claim to the house because there is no written agreement giving it to them.
Because couples often contribute different amounts toward the purchase of a house, they should devise a partnership agreement that includes a list of deal points. The pact should include details about how much each partner will contribute to the down payment, what percentage of each person's income should be put toward the mortgage and who will pay for other expenses, such as repairs and remodeling.
Lawyers advise couples to discuss their options when things are going well because that is when they are more likely to be fair and considerate. The agreement should include a buy-sell clause that includes what will happen if one partner wants to remain in the house, and how they will determine the market value of their home in case they separate. In this way, one of the partners would have to buy out the interests of the other partner, or the house would have to be sold, enabling the couple to pay off the mortgage and then split the assets in a more equitable way.
Elderly Couples: As late bloomers, who have gotten together after living their separate lives, find it convenient and less costly to buy a home together, this is one area that definitely needs attention. I had the occasion to have an unmarried, elderly couple that wanted to buy a condo to get away from renting and to have more privacy. As we went about the transaction there was constant talk about their separate children and grand children. Prior to closing, I sat down with them and had the talk. It was necessary to get them to understand that in the event of one of them getting sick or worse, that the details and ownership of the condo needed to be clearly defined so as to not get into a problem with their respective families. Fortunately, they had their closing lawyer draft the agreement and everything was taken care of at the beginning.
This story was something I had saved from the Hartford Courant, published in Jan, 2005. I keep copies of this in my office, and as delicately as I can I broach the subject with unconventional partners without trying to offend anybody.
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