- Unmarried couples make up nearly one in five first-time homebuyers, the NAR found.
- A lawyer says these buyers should sign a cohabitation agreement before purchasing a house.
- The agreement outlines what will happen if you break up and how to divide your assets.
With many people waiting to get married and prioritizing other life milestones, the rate of unmarried homebuyers is increasing. Today, 18% of first-time buyers are unmarried couples, the National Association of Realtors found.
While divorce law dictates who gets the house if a married couple breaks up, there’s no legal precedent that governs unmarried buyers in most cases, Mike Fiffik, an attorney and managing partner at Fiffik Law Group, said.
Because of that, unmarried buyers need to take extra care to protect themselves and their finances before jumping into joint home ownership, Fiffik said.
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“It’s the biggest purchase of your life,” he said. “It’s going to have a forever impact on your life. It’s worth spending some time on.”
Here’s how to ensure you’re protected — no marriage license required.
Acknowledge how unmarried homeownership is different
In many ways, your relationship might be similar to a marriage, but when it comes to homeownership, there are legal differences between buying property with someone you’re married to and someone you’re not married to, Fiffik said.
“For unmarried people buying a property, there are no laws or rules that govern what happens when that relationship breaks up,” he said.
An old legal approach, the law of partition, can be used to divide assets of unmarried couples, but it’s outdated and clumsy, Fiffik said, so it’s best to craft your own agreement. These cohabitation agreements should be made with a lawyer (more on that below).
At the same time, if you’re both on a mortgage, your finances are tied together, despite not being married. If your partner misses a mortgage payment, it affects your credit. If they have a legal judgment against them, the house you share can be considered their asset — even if you’re not married — and may have a lien put on it, which means that when you sell or refinance the home, part of the proceeds must go to pay the court order.
Get honest about your finances
Before you even consider buying a home together, Fiffik suggested getting very honest about your finances. That means disclosing your debts, income, bills, and credit history to each other.
This conversation can “get you a better sense of whether making the leap into home ownership with your partner is a good idea or not,” Fiffik said.
After that, talk about a budget, not only for the home you’ll purchase but also for maintenance, improvements, furnishings, and other expenses.
Consider the ‘what-ifs’
To enter joint home ownership fully informed, you must consider many nonideal scenarios and how you’ll respond to them. Fiffik recommended thinking about these questions:
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What happens if you break up? Consider questions such as: Does one person get to stay, or will you sell? How long will the partner in the home have to refinance to get the other partner off the mortgage?
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Will you own equal shares of the home? If not, what will the split look like?
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How will you cover utilities and repairs?
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Will you co-own items in the house such as furnishings and necessities like snowblowers or lawnmowers? Or will each person supply a portion of the necessary items?
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How will you handle financial hardship? What happens if one partner loses a job or can’t afford to pay their share of the mortgage?
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What if you decide to sell? How will you split the proceeds if you sell the home?
Talk about the deed
When married people buy a home, they’re often both on the mortgage and deed. But unmarried couples have a few options when it comes to official ownership of the home, Fiffik said:
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Only one partner is on the deed and mortgage. If you choose this approach, think about how to protect the partner who may be helping pay the mortgage but who is not on the deed and mortgage, which means they technically have no legal right to the property (or obligation to the debt).
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Co-owners with rights of survivorship. In this scenario, you both own the home. If one partner dies, the entire property goes to the other partner.
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Co-owners as “tenants in common.” In this case, both of you own a “share” of the home. You can pass the share to other people, such as your children, or even sell it.
Craft a cohabitation agreement
Once you’ve talked through all the questions above, it’s time to get the answers in writing. A lawyer can help you craft a cohabitation agreement — a legally binding contract that outlines who owns the home, what everyone’s financial obligations are, what happens if you break up or you or your partner dies, and other details of joint home ownership.
In short, Fiffik said, these agreements help you anticipate anything — and how you’ll respond ahead of time.
It “forces you to get on the same page when it comes to homeownership,” he said.
