Buying a home is often the most significant financial investment a couple can make. But it’s not only married couples that are buying homes together. Many people are now buying a house with a friend, boyfriend, girlfriend, sibling or someone they are not married to. So, here are some things to know before buying a house with someone other than a spouse.
Why are You Buying a House with a Friend, Girl/Boyfriend or Sibling?
According to a National Association of Realtors survey, nine percent of house buyers in 2019 were unmarried couples. So, here are some reasons that you may be considering buying a house with a friend, boyfriend, girlfriend, sibling, or someone you are not married to:
- The COVID-19 pandemic has resulted in a desire for more living space. And, the boom in remote work has decreased commuting concerns.
- Mortgage rates have been at record lows for years, helping to make house ownership more affordable. Some think it’s good to buy and lock in a low rate, before interest rates go back up.
- Desirable neighborhoods have become more affordable, but it usually takes more than one income to buy a house.
Consider These Risks Before Buying a House with Someone You Are Not Married To
It is understandable why you may want to buy a house with a friend, boyfriend, girlfriend, sibling, or someone you are not married to. But, there are many risks you should consider before completing the purchase. First of all, you could damage your finances long-term if the relationship ends unexpectedly. Then, you may have to pay for a mortgage that you cannot afford by yourself. Other things to know before buying a house with a friend include:
- The house may be foreclosed if your friend or partner loses their job and cannot pay for the mortgage payments or property taxes. Foreclosure is expensive and can hurt your credit score.
- If the parties cannot agree on selling the property, they may have to turn to the court system for help, which can be a lengthy and costly process.
- Either party can be held responsible for the entire sum of the mortgage if both names are on it. If one party stops contributing to the mortgage because of a decrease in income, the other party must make up the difference; something they may not be willing or able to do.
- If you are trying to sell a property at less than the purchase price, neither party may be able to make up the difference. The same goes for trying to buy a partner or friend out of their share.
When Buying a House with a Friend Goes Wrong
The attorneys at Manning & Clair recently tackled one of these cases. A woman purchased a house with a friend, but the friend went bankrupt soon after. The friend moved out and could no longer pay her share of the mortgage. She was released from liability on the mortgage, but her name remained on the title. As a result, the woman had to pay the entire mortgage payment by herself, which created a financial strain. She was creating wealth and equity for her former friend by paying the mortgage payment. But, she couldn’t refinance or sell the property since the friend’s name was still on the title. Even when she had a relative move in to help with the mortgage payment, her hands were tied since the friend wouldn’t transfer the title.
How to Financially Protect Yourself
Take the proper legal safeguards when buying a house with a friend, boyfriend, girlfriend, sibling, or someone you are not married to. Even though it may not be the easiest conversation to have, secure an agreement in writing (create a trust, for example) with specific terms on what would happen should the relationship come to an end. By considering these things to know before buying a house, you will enjoy clarity and peace-of-mind.
Our team has extensive experience in both commercial and real estate law. We can provide the support and professional guidance you need to make the experience as cost efficient and successful as possible. Please contact us now to discuss any issues you may have; we will be happy to help you.