Over the years, many married couples have come to us for assistance with buying a home. Today, however, it is becoming increasingly common for unmarried couples, family members, friends and even business partners to buy a home together. Nonetheless, there are important considerations involved when non-spouses buy a home, some of which are discussed in this article.
Get It in Writing
Buying a home is probably the single largest financial transaction that many people will undertake during their lifetime. When the parties are not married, moreover, there are unique issues involved, such as how expenses will be handled, who owns what percentage, and how title will be held, among others. For this reason, it is essential to enter into a co-ownership agreement to clarify the parties’ understanding on these and other issues and to avoid any future misunderstandings.
Who Will Pay Household Expenses?
Owning a home typically entails a variety of expenses such as mortgage payments, property taxes, insurance premiums, utilities, repairs and other related costs. How these costs will be allocated can be specified in a co-ownership agreement, based either on the percentage of each party’s ownership interest in the home or the amount of time each party spends there.
How Will Title Be Held?
When individuals buy a house, the deed serves as evidence of how the owners hold title. Generally there are two options for sharing tile with a non-spouse, as tenants in common or as joint tenants with right of survivorship, and there are differences between the two.
- Tenants in Common – This is the most common way for co-buyers who are not related to take title. This arrangement allows multiple parties to own unequal shares of a home, each of whom can sell his or her share at any time. Additionally, if a co-owner dies, that owner’s share is transferred to beneficiaries of the estate, such as a spouse or children, provided, however, that he or she has specified this in a will or trust.
- Joint Tenants (with Right of Survivorship) – This option allows co-owners to have equal shares in the property. So if two people buy the home together, each has a 50 percent interest; if three people buy the home, each has a one-third interest, and so on. In this arrangement, however, neither partner can sell his or share of the house without the permission of the other. Also, if one of the co-owners dies, his or her interest automatically passes to the other owner(s) named on the title without the need for a probate proceeding.
Ultimately, clarifying how title will be held ultimately determines the percentage of ownership for each party. Other factors could come into play, however, such as whether one party puts up more money for the down payment, or if the other party pays more toward the maintenance of the premises.
Moreover, other issues that need to be considered include the credit rating and finances of each party, how this information will be shared, and whether or not the co-owners will establish a joint bank account to pay the necessary expenses. Again, issues such as these need to be spelled out in the co-ownership agreement. In the final analysis, if you are considering buying a house with a non-spouse, you are well advised to engage the services of an experienced real estate and estate planning attorney.