Buying a house is a big and exciting decision for any couple. However, it can be particularly challenging if you are doing it as an unmarried couple. If you are considering buying a house with someone other than a spouse, discuss the following questions with your significant other first:
There are multiple ways an unmarried couple can take title to a house.
• Sole ownership – One person could hold the title in their name solely. This means only one person would have a legal right to ownership of the house.
• Joint tenancy – Each person owns an equal 50% share of the house. In the event one owner dies, that deceased owner’s share automatically passes to the surviving owner.
• Tenancy in common – This form of ownership is similar to the joint tenancy mentioned above; however, unequal shares are allowed, and shares pass differently in the event of death. For example, you and your partner could be tenants in common, with you having a 60% share and your partner having a 40% share. Each of you has an equal right to possess and use the property, though. Further, if one of you dies, that deceased owner’s shares pass to his or her heirs, not the surviving owner.
Note that deeds and titles are not the same. Title refers to the concept of ownership rights in the property. Whereas a deed is a legal document that transfers those ownership rights in property (i.e., title) from one party to another. For more information on deeds, see our post Different Deeds and What They Mean.
Taking out a mortgage is a big deal and can have major implications on your finances and credit score. If you take out a mortgage with the other person, you will both be liable for repaying the debt. This could be a problem if someone stops contributing financially or you separate from one another. If you are both on the mortgage, the only way to get someone off the mortgage is to pay off the debt (i.e., sell the property) or refinance the mortgage solely in your name.
Assuming you and your partner are on the deed together, you each have an equal right to possession of the home. So, you may have a huge problem if neither of you is willing to leave the property after you break up or separate. After all, you cannot split a house in two. At this point, you will likely have to sell the property, refinance the mortgage in one of your names, or enter into an agreement with the other person to rent or purchase their share of the property.
If you and your partner are considering purchasing a home together, do not assume happily ever after will apply to your relationship. While we hope it does, you need to protect yourself in the unfortunate event things do not work out. One way to do this is to use a cohabitation agreement. A cohabitation agreement is a legally binding contract that sets forth the procedure you and your partner will follow while you own the property—including in the event you separate from one another. For example, a cohabitation agreement may lay out the type of ownership, sharing of utilities and housing expenses, possession, a dispute resolution process, a buyout agreement, and much more.
To avoid conflict and confusion, you and your partner must have a detailed plan as to what will happen to the house if you split. Our Indiana real estate attorneys will listen to your situation, advise you of liabilities, and carefully craft a plan to protect you and your partner’s interests.
This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your lawyer on any specific legal questions you may have concerning your situation.