How to Buy a House With Someone You’re Not Married To

Buying a home with a partner when you are not married differs from purchasing property as a married couple. It requires careful planning to navigate legal, financial, and personal complexities, ensuring a secure and equitable homeownership experience.

Choosing a Property Ownership Structure

Choosing the legal structure for property ownership is a key decision for unmarried couples. This choice dictates how the property is held, managed, and handled upon the death of an owner. The two primary options are Joint Tenancy with Right of Survivorship and Tenancy in Common.

Joint Tenancy with Right of Survivorship (JTWROS)

Joint Tenancy with Right of Survivorship (JTWROS) means each co-owner has an equal, undivided interest in the property. The “right of survivorship” means if one owner dies, their share automatically transfers to the surviving co-owner(s) without probate. This automatic transfer bypasses the deceased’s will, ensuring the property remains with the surviving partner. While simple and avoiding probate, an owner cannot pass their share to other heirs, such as children from a previous relationship, through a will.

Tenancy in Common (TIC)

Tenancy in Common (TIC) allows co-owners to hold distinct, individual shares, which can be equal or unequal. For instance, one partner might own 60% and the other 40%, reflecting unequal financial contributions. Unlike JTWROS, TIC does not include the right of survivorship. Upon the death of a tenant in common, their share passes to their estate, distributed according to their will or state intestacy laws if no will exists. This structure offers greater flexibility for owners to determine who inherits their share, making it suitable for situations where partners wish to pass their interest to someone other than their co-owner. Without a will, the surviving partner may not automatically inherit the deceased’s share, potentially leading to unintended outcomes.

Managing Shared Finances

Managing shared finances is crucial for unmarried couples purchasing a home, from acquisition to ongoing expenses. Open discussions about individual financial situations, including income, credit scores, and existing debts, are essential. This transparency helps both partners understand their collective financial standing and plan for the responsibilities of homeownership.

Down Payment

For the down payment, couples must decide if contributions will be equal or unequal. If unequal, documenting each partner’s share is essential for clarity, especially if the property is sold or the relationship ends. This documentation can be as simple as detailed records of bank transfers or formal agreements. Large financial gifts, such as those for a down payment, may have federal income tax reporting requirements for the giver if they exceed certain annual limits, typically $18,000 per recipient per year.

Mortgage Application

The mortgage application process has specific considerations for unmarried applicants. While both partners can apply jointly, lenders evaluate the financial qualifications of all applicants, including credit scores, debt-to-income ratios (DTI), and income stability. If one partner has a significantly lower credit score or higher debt burden, it could negatively impact the interest rate or ability to qualify for the loan as a couple. In such cases, the partner with the stronger financial profile might consider applying for the mortgage alone to secure more favorable terms, though this places sole legal responsibility for repayment on that individual.

Ongoing Expenses

Beyond the purchase, ongoing homeownership expenses require a clear financial strategy. These typically include mortgage payments (principal, interest, property taxes, and homeowners insurance, collectively known as PITI), utilities, and maintenance costs. Couples should determine how these expenses will be divided, whether equally or proportionally based on income, and establish a system for consistent payments. Many unmarried couples find it beneficial to set up a joint bank account specifically for these household expenses, with each partner contributing their agreed-upon share regularly. This approach simplifies bill payments and provides a clear record of shared contributions. Consistent tracking of all financial contributions, especially for repairs or improvements, is crucial to maintain transparency and avoid future disputes.

Creating a Cohabitation Agreement

A cohabitation agreement, also known as a domestic partnership or living together agreement, is a legally binding document outlining the rights, responsibilities, and expectations of unmarried partners who co-own property. It is important because, unlike married couples with legal protections for property division and financial support upon separation, unmarried partners lack automatic rights. It protects both parties’ interests and can prevent costly disputes if the relationship ends.

Key Clauses

Key clauses should document initial financial contributions, such as down payments and closing costs, to establish each partner’s equity. The agreement should also detail ongoing financial responsibilities for mortgage payments, property taxes, insurance, utilities, and routine maintenance, specifying how these expenses will be shared. Provisions for handling major repairs, renovations, or improvements, including who will contribute and how these costs will affect future equity, are important to include.

Dispute Resolution & Dissolution

The agreement should establish mechanisms for dispute resolution, such as mediation, to address disagreements before they escalate. A cohabitation agreement must specify how the property will be handled if the relationship dissolves. This includes options like one partner buying out the other’s share, how the property will be valued for a buyout, or the process for selling the property and dividing the proceeds. It should also address the division of any jointly acquired assets and responsibility for joint debts. Provisions for one partner’s death or disability are essential, outlining how the property will be managed or transferred. Seeking independent legal counsel for each partner is advised when drafting and signing a cohabitation agreement to ensure both parties understand their rights and obligations, and that the agreement is legally sound and enforceable.

Planning for Future Events

Proactive planning for future events is essential for unmarried couples who co-own property, leveraging the ownership structure and cohabitation agreement. The dissolution of a relationship, while difficult, can be managed more smoothly with prior arrangements. The cohabitation agreement provides a roadmap for dividing the property, detailing whether one partner will buy out the other’s share, or if the property will be sold and proceeds distributed according to agreed-upon percentages. Without such an agreement, property division can become complex, potentially leading to lengthy and costly legal battles.

Death of a Partner

A partner’s death introduces legal implications based on the chosen ownership structure. If the property is held as Joint Tenancy with Right of Survivorship, the deceased partner’s share automatically transfers to the surviving owner, bypassing probate and any will. If the property is held as Tenancy in Common, the deceased partner’s share does not automatically go to the surviving co-owner. Instead, it becomes part of their estate and is distributed according to their will or, in the absence of a will, by state intestacy laws, which typically prioritize blood relatives over an unmarried partner. For Tenancy in Common, a comprehensive will is important to ensure the deceased partner’s share passes to their intended beneficiary, including the surviving co-owner.

Disability or Incapacity

In cases of disability or incapacity, the cohabitation agreement can address how financial and property management responsibilities will be handled. This might include designating a power of attorney or outlining procedures for managing shared assets if one partner becomes unable to do so. Such foresight helps protect both partners’ interests and ensures the property can be maintained without disruption.

Selling the Property

Should both partners decide to sell the property, the cohabitation agreement can provide a clear process for listing the home, agreeing on a sale price, and distributing the proceeds, especially if initial contributions or ongoing expenses were unequal. If one partner wishes to sell and the other does not, the agreement should outline mechanisms for resolving such a disagreement, potentially including a forced sale or a buy-out clause to prevent prolonged disputes. These predetermined frameworks minimize conflict and provide a structured approach to managing the property.