Are you ready to take the next step in your relationship and buy your first home as a couple? Homeownership is a wonderful adventure you and your better half will enjoy for years. Of course, you better not forget all the details that come along with homeownership. Whether you are married or living common-law, here are some things that you need to know about buying a house as a couple.
Buying a house as a couple
The decision to buy a home is an exciting one, but it can be especially complex if you’re navigating the purchase with a significant other who’s not married to you. We’ll walk you through what to consider if you’re unmarried and planning to buy a house with your partner.
Agree on financing
Taking out a mortgage can have huge implications for your finances. Talk to your partner about your budget and how much you’re comfortable financing before you start searching for a house. As part of this process, review each partner’s finances, including credit scores, monthly debt service and any other factors that could influence your ability to cover housing expenses. Once you know how much you can each contribute every month, calculate how much house you can afford to finance.
Have a plan for sharing costs
While splitting costs 50/50 may seem like a straightforward way to share the responsibilities of homeownership, it’s not always that simple. To ensure everyone is on the same page, hash out who will be responsible for property taxes, homeowners association fees, insurance premiums and maintenance costs before you purchase a home. Also, consider how you’ll split up utilities and other household expenses.
Sign a cohabitation agreement
A cohabitation agreement is a legally binding contract that details the division of property and other assets in case of a breakup. This document must be properly drafted and executed. Therefore, we recommend working with an attorney to make sure both parties interests are adequately protected. Here are some sections to include in your cohabitation agreement:
- Type of ownership on the deed and title
- Sharing of housing expenses
- Buyout terms in the case of a breakup
- Exit strategy if one partner wants to sell
- Dispute resolution process
If you and your partner sign a cohabitation agreement, periodically revisit the document to address any changes to your circumstances.
Who is applying as the lead borrower?
Unmarried partners typically apply for mortgages as individuals, rather than as a couple. For that reason, the most financially qualified partner needs to apply for the mortgage so you can get more favourable mortgage terms and competitive interest rates. Identify the strongest applicant in your relationship by taking time to review each partner’s credit score, income, employment status and history, and debt-to-income ratio.
How to make the property purchase 50/50
To purchase a property 50/50, each party should contribute half of the downpayment and commit to making half the mortgage payment each month. When recording your ownership, consider a joint tenancy or tenancy in common, wherein each party has equal rights to the property. Likewise, when splitting a house 50/50, each partner should contribute half of the utilities, maintenance and other household expenses.
What happens if you split?
If you’re unmarried what happens if you split from your home’s co-owner? The fate of the property depends on how it is titled and whether there are any other agreements in place. To avoid conflict and confusion in the case of a breakup, it’s imperative that you and your partner detail what will happen to the house if you split before purchasing the home. It’s never pleasant to consider the end of a relationship, but a carefully written cohabitation agreement can provide peace of mind and save you money and further complications down the line.