This question comes up a lot – it may be that you are looking to buy with a friend, a significant other, a sister or brother – or even a parent. What are the implications and what is the best way to protect yourself?
I have had many clients buy homes with significant others – sometimes it works and sometimes it doesn’t. The biggest drawback for those is if you do separate, there isn’t a legal document that says what happens with the home. When you are married and divorce, there is a divorce decree that says who gets what and who is responsible for the home. So what to do? It depends on your situation. Maybe you are engaged and planning your wedding – you find a home you love, you decide to buy – for many that works since you will be getting married and have the legal protection. If not, you may want to talk to a lawyer and draw up legal documents that says what happens to the home if you do separate.
For those thinking about buying with a family member, it may work out as long as you have talked about what happens in the future. For some it is a matter of a parent co-signing on your mortgage. Ideally you will refinance when you can qualify on your own so your parents are off your mortgage.
One thought is to look at how you take title – in Minnesota you can take title as joint tenants or tenants in common. The short answer is joint tenants means if something happens to you, your share of the home goes to the other person. With tenants in common, you each have a share – if something happens to you, your share goes to your estate. In that case, it may be children or other family members – maybe it’s the other person you bought the home with.
For many if you buy with another person and find you need to get out, you may only have one option and that is to sell the home. In some cases you may be able to refinance the home into your name and take the other party off the mortgage and title.
There are many financial experts that have their own opinion. Some say never buy with someone you aren’t married to, others say don’t wait. There are some things you want to look at before you buy. Talk to each other about your financial situations – if one of you can’t manage your money, buying a home together may not be a good option. If one has good credit and one doesn’t, you may not want to buy a home together. If one of you has money for a down payment and the other has none, you may want to get a legal document drafted showing that you have more equity in the home.
Many people buy a home with someone else and never have an issue. The important thing it to talk about it before and know what your plan is. Owning a home can be a great way to gain equity and build wealth. Just be prepared for all situations if you are buying without being married. It may cost money to get legal documents drafted, but it can save you money in the end if something does happen.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
