It seems every year, more and more couples are deciding to buy a home together before getting married. Doing so can minimize financial stress as the couple can save up for a down payment and consistently pay their mortgage while not worrying about saving up for the cost of a wedding. That said, it also raises its own financial and personal challenges in the short and long run. When making this decision to own a home together before marriage, there is a lot to consider:
- It’s very rare for two people to be in exactly the same place financially when buying a home. Typically, you’re going to be splitting a down payment and purchase price of a home. If only one person needs to apply for a mortgage, you will both have to co-sign on it, meaning if you break up, you’re both on the hook – even if one person has already paid their portion in full. You will need to be very upfront with each another when making a financial plan so one person is not left to foot the bill if the other can’t, or won’t, pay.
- As an unmarried couple, you want to be certain that you co-own the home. Being common law does not entitle a person to 50 per cent of the property and if only one person’s name is on the title, the other person is, for all intents and purposes, paying rent and not paying into a mortgage. Co-owning means you will both have equity in the home when you decide to sell it down the road.
- Draft a cohabitation agreement that will have everything from the down payment, title, mortgage, taxes, maintenance fees, utilities and repairs covered in case of a breakup. Keep in mind that the agreement must be reasonably equal for it to be valid. Do you sell the house, and each takes half of the profits? Does one person buy the other out? What happens if one of you passes away? Typically, the other half of the house is inherited by the surviving person, but you will want this covered in your cohabitation agreement.
Buying a home together is a huge step, married or not. So, you want to be absolutely certain that you take all the proper steps and protect yourself in the worst-case scenario. You will want a good support team, including a knowledgeable realtor. They know the ins and outs of buying homes and what documents you need in any situation you happen to be in. They will help you with everything from your first viewings and information sessions to guiding you through signing the paperwork and holding the keys to your new home in your hands. Whether you decide to buy a home before or after marriage, make sure that everything is done officially to minimize any potential future stresses that could occur.
