Unmarried Couple Mortgage: How to Buy a Home Together

Buying a home as an unmarried couple comes with unique financial and legal considerations. Unlike married couples, who benefit from automatic property rights in many cases, unmarried partners must take extra steps to ensure their interests are protected. Without proper planning, issues can arise regarding ownership, financing, and what happens if the relationship ends.

Title Ownership Options

How a couple holds title to a home affects legal rights, financial responsibilities, and what happens if one person dies or the relationship ends. Choosing the right structure ensures both partners are protected.

Joint Tenancy

Joint tenancy gives both individuals equal ownership and includes the right of survivorship, meaning if one partner dies, the other automatically inherits their share without probate. This simplifies estate matters but also means neither person can sell or transfer their interest without the other’s consent.

Since ownership is split 50/50, financial contributions do not affect equity. If one person pays more toward the down payment or mortgage, they may not recover that extra investment unless a separate agreement is in place. Additionally, if one partner has debts, creditors can place liens on the property, potentially affecting both owners. A cohabitation agreement can clarify financial responsibilities and protect each person’s interests.

Tenancy in Common

This structure allows each person to own a specific percentage of the property, which can reflect financial contributions. One partner might own 60% while the other holds 40%, providing flexibility in determining equity shares. Each owner can sell, transfer, or will their portion without the other’s approval.

While this arrangement allows for customized ownership, it also means that if one person dies, their share may go through probate, delaying the transfer of ownership. Disagreements over property management, such as selling or making improvements, can also arise. A written agreement outlining decision-making processes and buyout terms can help prevent conflicts.

Community Property

Community property laws apply in states like California, Texas, and Arizona, primarily for married couples, but some states allow unmarried partners to create similar agreements. Under this model, both individuals own the property equally, regardless of financial contributions.

Each person has a 50% stake, and debts tied to the home are shared. If one partner dies, their share typically transfers to the other unless a will specifies otherwise. While this simplifies division, it may not be ideal if one person contributes significantly more. A property agreement can clarify contributions and reimbursement rights. This structure may also have tax implications, particularly regarding capital gains if the home is later sold. Understanding local laws is essential before choosing this option.

Combining Credit Scores

When an unmarried couple applies for a mortgage together, lenders evaluate both credit histories but use the lower middle score of the two applicants. For example, if one partner’s three credit scores are 750, 740, and 730, and the other’s are 690, 680, and 670, the lender will use 680 to determine loan eligibility and interest rates.

A lower score can lead to higher interest rates or even loan denial. If one person has significantly better credit, applying under their name alone may secure better terms, but this means only they are legally responsible for the mortgage. A cohabitation agreement can outline repayment expectations and equity contributions to avoid disputes.

Debt-to-income ratio is another factor lenders consider. High student loans or credit card debt can reduce borrowing power. Paying down debt before applying and avoiding new credit inquiries can improve approval odds.

Splitting Monthly Costs

Managing home expenses requires a clear plan to ensure fairness and avoid financial strain. Mortgage payments are the largest recurring cost, but property taxes, homeowners insurance, utilities, maintenance, and repairs also add up.

One approach is proportional cost-sharing based on income. If one person earns 60% of the household income and the other 40%, they might divide costs accordingly. Another option is an equal split, though this may not be practical if one person earns significantly more.

Setting aside funds for home maintenance is also important. Unexpected repairs, such as a broken HVAC system or roof damage, can be costly. A joint savings account for home-related expenses ensures funds are available when needed. Tracking shared expenses through budgeting apps or spreadsheets can help maintain transparency.

Mortgage Interest Deductions

The U.S. tax code allows homeowners to deduct mortgage interest, but unmarried couples must divide the deduction based on actual payments made. If both individuals are on the loan and contribute equally, they can split the deduction 50/50. If contributions are unequal, deductions must reflect each person’s share.

Form 1098, issued by the mortgage lender, reports total interest paid under one borrower’s Social Security number. If both owners contribute, the person receiving the form must inform the IRS that a portion of the deduction belongs to the other party. This is done by attaching a statement to the tax return specifying the split. The other individual must also provide an explanation when claiming their share. Proper documentation is necessary to avoid IRS scrutiny.

Allocation of Equity Shares

Since unmarried couples do not have automatic legal protections like married couples, formalizing equity shares ensures each person receives a fair portion of the home’s value.

One approach is to allocate equity based on financial contributions. If one person provides 70% of the down payment and the other 30%, the title can reflect that split. Another option is equal ownership, regardless of contributions, for couples who view the home as a shared asset. A co-ownership contract can prevent misunderstandings.

Future financial responsibilities should also be considered. If one person funds a major renovation or covers unexpected expenses, the agreement should outline how these costs affect equity. For example, if one partner pays for a $50,000 home improvement, they may receive a proportionate increase in ownership percentage or reimbursement upon sale. A structured process for adjusting equity shares over time ensures fairness.

Exit Strategies

Planning for potential future scenarios is essential. Without a clear exit strategy, disagreements over selling, refinancing, or buyouts can lead to legal disputes.

A buyout agreement allows one partner to purchase the other’s share if the relationship ends. This typically includes a valuation method, such as an independent appraisal, to determine the home’s fair market value. If a buyout is not feasible, selling the home and splitting the proceeds may be the best option. A timeline for decision-making can prevent prolonged disputes.

If one partner wants to keep the home but cannot qualify for a mortgage alone, refinancing may be necessary to remove the other person from the loan. If refinancing is not an option, a temporary co-ownership arrangement may allow one partner to remain in the home while continuing to share financial responsibilities until a sale or buyout becomes viable. Addressing these possibilities in advance ensures both individuals understand their options.