Buying a home with a boyfriend, girlfriend or business partner can be risky -- Well much more risky than buying a home with a spouse. This is because, with respect to Estate Planning, and liability, married homeowners typically get federal and state level-protection from which non-married homeowners are typically exempt. Not to get into moral choices, cohabitation is very common and accepted in this day in age and so is home ownership. So how can these two cohabitate is the real question? Have you ever heard of Murphy’s Law, and how everything that CAN go wrong WILL go wrong? Well you have to prepare for this and make sure both you and your significant other understand what you are getting into and are both equally protected.
Non-Married Buyers Need To Make Protection
Non-married, joint homebuyers, should at the very least make their own federal and state protection with the help of an attorney. At minimum, non-married joint homebuyers should consider two binding agreements in their partnership (yes that is what it is):
1. A cohabitation agreement. Something that outlines how the home will be shared.
2. A property agreement At minimum. And don't cut corners by using forms from the internet. Hire an attorney to get it right. This is important if something happens to your partnership that there is no confusion on how the property will be paid for, liquidated or shared.
Google Is Not Your Attorney.
Hire Someone Good. Now, a lot of joint buyers will instinctively hit Google for "cheap legal documents" or a DIY legal program. Don't be one of them. Hiring an attorney will cost a few hundred dollars more than using Google but it's money well-spent. And whatever the cost, it's far less than the cost of fighting a battle in court after-the-fact should there be a breakup. And don't think it can't happen to you. It happens all the time.
And potentially even worse is if one of the joint owners die and there's no estate plan in place. The home could end up in probate. It could also head to foreclosure if the mortgage payment that was manageable with two incomes is an impossibility with just one. A basic life insurance policy can alleviate that risk.
How to claim Title
If you choose to only have one side of the relationship on the loan for qualifying purposes it is vital to make sure you both are at least on title. Once again, it is important to speak with an attorney to make sure you both are equally protected.
Useful Advice On Joint Ownership
The clip below was first shown on NBC's The Today Show in May 2007. The message is still important today. Love is blind, but it can also be blinding. Domestic and business partnerships don't always end in happily ever after and joint homebuyers need to be prepared for that. Beyond the legal consequences, you'll want professional advice on the mortgage-side, too. How you actually set-up your mortgage application can make a difference in the mortgage rate you're quoted.