Cohabitation Agreement Can Protect Credit

Summary: Unmarried couples who buy property together or live together may want to sign a partnership agreement. A partnership agreement helps especially in cohabitation situations when one partner has poor credit. Cohabitation before marriage can go more smoothly with a partnership agreement.

Q: I am buying a fixer-upper home with my boyfriend. Our relationship is anything but stable. I am listed as primary borrower. What does this mean?

A: If you haven't bought this property yet, please consult with a real estate attorney who can create a partnership document for you and your boyfriend. The document will outline who has what financial and other responsibilities, who is bringing what capital to the table, who is responsible for paying for what, and what happens if you and your boyfriend split up.

A partnership document will help alleviate some of your concerns. If you're concerned about even mentioning a partnership document to your boyfriend, then you should seriously reconsider purchasing a piece of property with him. If you can't discuss matters of finance civilly, then you shouldn't buy anything as illiquid as real estate.

If you have already bought the property, then you should still go to a real estate attorney to have the partnership document drawn up. The difference is that you won't have as much, or any, wiggle room with regard to titling the property.

To your direct question: If you're listed as a primary or co-borrower on the loan documents, you are entirely responsible for making sure the payments are made on the property. Should your boyfriend walk, and stop making payments, he would be a co-owner of the property, but you would be making the entire mortgage payment yourself. If you miss a payment (or if he doesn't pay his fair share), your credit will suffer greatly.

Loan Borrowers' Credit History Can Be Hurt

His credit will suffer only if he is also listed as a borrower under the loan. You could be the primary borrower and he could be the co-borrower. If you are both the borrowers, you are both entirely responsible for payments under the loan. If a payment doesn't get made, both of your credit histories will take a hit.

If you are the only borrower and he is not, but he is a co-owner of the property, your arrangement may not be fair. That's why you need a partnership document that outlines a way out of the ownership quagmire in case something goes wrong.

If you can't afford to make the payments on this property on your own, you should rethink your purchase since you admit that your "relationship is anything but stable." The last think you need is to have your credit in the toilet because your boyfriend didn't hold up his financial end of the deal.

Good luck.