The idea of purchasing a home excites anybody, married or single. Is it, however, a good idea to buy a house before marriage? Many of the pros and cons of buying a property apply whether you are married or not.
However, there are some distinct pros and downsides of purchasing a home before marriage. If you’re thinking about buying a house with your spouse before tying the knot, keep the following points in mind.
Three things to consider when buying a house before marriage.
The first thing to consider is whether you’ll use both of your incomes in qualifying and applying for a mortgage. Notably, your marital status has no bearing here. Rather, you should base your decision on the strength of your financial profiles.
If you both have similar credit scores or standing and debt levels, applying together is probably a good option. Having two incomes on the application will boost your chances of approval in this scenario. Furthermore, if you apply jointly, you will most likely be granted a larger mortgage amount than if you applied alone considering your financial situation.
However, applying jointly may not be the best idea if one of you has a much lower credit score or a significantly larger level of debt. These factors may work against you by lowering your chances of approval and obtaining the best interest rate.
Draft a Cohabitation Agreement
Even if you want to marry, if you aren’t legally married at the time you buy your house, it’s a good idea to draft a cohabitation agreement for the property acquired. Simply said, though no one likes to think about it, relationships may and do fail. It’s best to make some difficult financial decisions ahead of time when tempers and emotions aren’t high.
One of these agreements can be drafted with the assistance of a real estate attorney. He or she can advise you on what legal protection you require, but here are some points you should include in your agreement:
- Who is responsible for meeting each of the home’s financial obligations (mortgage payment, property taxes, maintenance and upkeep, and so on)?
- How will you deal with the house if you split up? Will you sell it or will one of the parties buy out the other?
- How would you divide the net proceeds if you decide to sell?
Taking care of the act
Legally, who is on the mortgage does not decide who owns the residence. It is determined rather by who is on the deed, which records and transfers title to the home. You can indicate ownership in several ways:
- Sole ownership
Sole ownership means that just one of you owns the house, which means you’re the only one financially liable for it and the only one who can sell it or borrow against it.
- Joint tenancy
Joint tenancy Under this arrangement, you will both own an equal share of the home and must decide whether to sell or borrow against it together.
- Tenants in common
In this instance, each person owns a portion of the house. Those shares, however, do not have to be equal, making it a common arrangement if one person contributes much more monetarily than the other. Each tenant can individually opt to borrow against their share, and if that person dies, their part is given to their heirs rather than the surviving tenant.
Advantages of Buying a House Before Marriage
Rent savings are possible.
Rent can be expensive, with prices rising by an average of 3% to 5% per year. Not only that but living apart means paying two rents. Putting all of your living expenses under one shared mortgage might save you hundreds of dollars every month.
Create equity sooner
If you already know you intend to live with your spouse in the long term, buying a house before marriage sooner allows you to begin creating equity sooner. After all, the longer you wait, the more likely it is that property prices will rise.
Sense of self-sufficiency
Whether you’re moving out for the first time or have been living alone for some time, purchasing a property can provide a valuable sense of independence. Many people look forward to this life event.
A co-signer could assist with preapproval
If you decide to pursue a joint application, having your partner co-sign could aid in preapproval. Additional income can help you qualify for a lower-interest mortgage.
Utility bills will be shared if you have two incomes
Moving in together allows you to split not only your monthly bills but also your utilities. Saving money on living expenses might be a wise financial option.
Distribute household tasks
Cooking and cleaning can be time-consuming tasks. By moving in together, you may divide household tasks and save time for both of you.
Disadvantages of Buying a House Before Getting Married
Getting a mortgage with your partner might put a financial burden on the relationship since money issues are frequently a source of contention. Before integrating your finances in this way, be sure you’ve discussed your financial habits and money opinions in depth.
Many mortgages are 30-year commitments, and financial experts advise living in a home for at least 5 years before selling. This time commitment may be troublesome if the relationship fails.
There is no equal division protocol
If the relationship does not last, married people may have extra legal protection. Rules demand equitable asset allocation following a divorce, but few laws apply to non-married couples who divorce.
Buying a property jointly can lead to relationship problems for a variety of reasons. Increased utility expenditures, for example, could be a source of contention if one spouse regularly turns off the lights while the other never does. Problems might also occur if one person believes they are doing an unfair portion of the housework.
Possible equity loss for one partner
If a couple is buying a house before marriage together but only one person is on the mortgage and title, one individual may lose equity. Contributing to monthly mortgage payments without the security of having your name on the title can result in contempt.