Practical home buying advice for unmarried couple (1 Viewer)

[Scott Wong]

The financial thread started by Ted (thank you, Ted Lee) prompted this thread. I did do a search but didn't come up with anything quite this specific.
My girlfriend and I have been living together for a while. I'm often disgusted when writing out our "rent" check as I view it as money out the window. Yes, we have a nice two bedroom apartment to live in... but with no equity to show for it. At least, nothing but a lousy security deposit with some interest attached when we decide to move out. While saving for a down payment and reviewing credit reports, should the subject of marriage be brought up before the subject of buying a home together be brought up? I'm speaking from a practical standpoint. i.e., problems, insurance ordeals, mortgage complications by the two of us not being married.
Is it a good idea for an unmarried couple to purchase property together? Does it work? I thought I read somewhere in the other financial thread that while it is possible to purchase property together, it's more likely we would qualify for a larger mortgage if we were married? Is that true?
Scott.

 

[Carl Johnson]

I think common sense would say that married couples are a better risk when it comes to approving a loan than a non married couple. It's risky either way but I would trust my loan to the married couple. If there was a breakup sorting out the details of who gets what would be easier in a divorce.

 

[MarcVH]

It's possible, and I know people who have done it. You will need to jump through some extra hoops, e.g. consult with an attorney, and think about some potentially unpleasant hypotheticals:

• What if you break up with her?
• What if one of you wants to have a "friend" move into this house, but the other doesn't?
• What if one of you wants to move away and sell, but the other doesn't?
• What if she can't (or won't) pay her share of the mortgage and other expenses for some reason?
• What if one of you dies?

A real-estate attorney should be able to draw up an agreement specifying how these various situations need to be handled.
Personally, I can't imagine being committed enough to somebody to cohabit and purchase real estate together, but not get married. That's just me though.

 

[Stacie]

I'm no expert, but to my knowledge, two unmarried people can purchase property together with no more difficulty than a married couple. I myself am married, but I have several friends who are part of gay or lesbian couples that purchased homes together, and encountered nothing unusual.

I'm not a lawyer, but I'm pretty sure that when both parties have signed on to a mortgage, both are equally responsible regardless of whether or not they are married -- your legal obligation to pay back the loan has nothing to do with whether the borrowers are married or not. So I don't think it matters, or at least not much.

Any more informed commentary forthcoming?

Stacie

 

[Dennis Nicholls]

I haven't personally looked at this book, but in general Nolo Press can at least outline the issues for you:

www.nolo.com At the very least you can be more focussed when you talk to a lawyer.

 

[Danny R]

As I said in the other thread, its best to be married before buying property.

The benefits are numerous, because the law automatically gives special rights to a spouse. If you are unmarried, you have to go out of your way to grant them.

In the event of an accidental death, the unmarried survivor might not automatically receive the full title to the joint property. Rather the courts might award only the value they put in, with the rest going to other beneficiaries. Likewise an unmarried survivor does not automatically inherit other property, such as a car, that were solely in that person's name, and has no say in matters after the death. A proper Will however fixes this.

An unmarried couple has no automatic Power of Attorney for Financial or Health Affairs. Which means if one of you becomes disabled, you might not have legal access to the other's accounts, or have the right to make any medical decisions. This as well must be spelled out in a separate legal document.

Its thus much easier to just get married.

 

[Stacie]

Scott, looks like you're in Minnesota -- you might find this useful (it's a Homebuyer's Handbook put out the MN Attorney General's office):
http://www.ag.state.mn.us/consumer/P...ook%202001.pdf
I note that it contains a passage saying, "it is against federal and Minnesota law for real estate agents, sellers, and lenders to discriminate against buyers because of their race, color, creed, sex, religion, national origin, marital status, status with regard to public assistance, disability, sexual orientation, or familial status."
Obviously, you will want to think about all of the issues that others have raised above, and seeking legal advice in such matters is never a bad idea, but legally,lenders, agents, and sellers cannot treat you any differently based on the fact that you're not married.
Good luck.

 

[Jeff Ulmer]

Buying a house as an unmarried couple is no different than buying real estate with any other business partner, but should necessitate an agreement between the two of you which covers the many possible situations you may encounter. As someone who bought property jointly with someone who was at the time a good friend, this agreement is highly advisable, and should outline every immaginable scenario, otherwise you may find yourself in a very uncomfortable position somewhere down the line.

As has been stated above, there are certainly advantages to being married when buying, especially in the event of death of one of the parties. Even if the ownership of the property is willed to the partner, it is considered a capital gain in most places, and may be taxable. Also, the deceased's assets are generally considered liquid upon death, and are therefore subject to income tax in many places, meaning that even if you were the sole beneficiary, you would be paying income tax and estate tax on the sale of your partner's equity, and possibly additional taxes for receiving the property. If you were married, the ownership of the property simply transfers, without taxes due.

However, despite some of the benefits marriage may have on buying a house, I certainly wouldn't say that it is the only way to do it - just make sure that there is a agreement in place. Depending on how long you have cohabitated, and where you are located, the law may deem you married regardless of your official status, but again, this is something you should look into with a lawyer, who is in a better position to advise you of the specifics to your case and situation.

 

[Stacie]

One more thing occurs to me. One of the issues Danny raised in his post was:

In the event of an accidental death, the unmarried survivor might not automatically receive the full title to the joint property.

I believe this is only an issue if you choose to hold the property as Tenants-in-Common. If you choose Joint Tenancy with Right of Survivorship, full interest in the property passes to the surviving owner(s) if one owner dies. You do not have to be married to be joint tenants w/ROS.

Again, I am not a lawyer. But I have a pretty clear memory of this from first-time homebuyer classes.

Stacie

 

[Ryan Wright]

Personally, I can't imagine being committed enough to somebody to cohabit and purchase real estate together, but not get married. That's just me though.

Not just you. It's me, too.

 

[Ted Lee]

whoa scott! guess i got ya thinking! whoops!
in my case, because i look better on paper (excellent credit, zero debt, good savings amounts, etc.) i think i actually qualified for as much on my own as i would with her on the loan.
she's been doing all the ground-work - calling the loan officers, real-estate people, etc. she hasn't mentioned anything about possible problems since we're not married. the loan officer even ran three scenarios: by myself, by herself and combined.
so, i don't think it'll be a problem as far as that goes.
i was wondering though. aren't there usually tax benefits when you're married?

 

[Keith Mickunas]

Actually Ted, there are tax penalties if you are married. If both of you make the same income, then you will get less of deduction and therefore pay more taxes. However if only one of you works, you'll pay less taxes than before. Look at the tax charts and you'll see that a married couple making 70k combined will pay more in taxes than two single people making 35k each. I believe there have been attempts by some either presidents or congressman in recent years to alleviate this and make it fair.

Of course, your car insurance may go way down if you get married, but I doubt it will be enough to cover the difference in taxes. But then you have to balance that against the wedding gifts, of course if you get china that's pretty much useless.

The only thing you might gain by getting married is less harrassment by both sets of parents. Of course, once you get married they'll start on the grandkids thing, so maybe that doesn't help.

 

[Ted Lee]

keith - you're killin' me!

 

[Danny R]

Actually Ted, there are tax penalties if you are married.

The Marriage Penalty is equally balanced by the very rarely mentioned Marriage Bonus. It all depends on the split between wage earners on if you pay more or less than two unmarried folks earning the same amount.

 

[Stacie]

Another tax consideration to note is the mortgage interest deduction. This is a fabulous tax break, especially in the early years of a mortgage when practically all you're paying is interest. Since my husband and I married and bought a house in the same year, we have not noticed the "marriage penalty" (though our nearly equal incomes mean we would feel it if we didn't have mortgage interest to deduct).

Obviously, you can deduct your mortgage interest whether you are married or not, but depending on your situation, the impact of the marriage penalty may be slight compared to what you will save on taxes once you've bought a house. That has certainly been the case for us.

Stacie

 

[Colin Dunn]

Why does this "marriage penalty" exist? Certain income levels are nearly unattainable by singles, but easily reached by couples. I guess that's somewhere around the $80,000-$100,000 mark in in Austin. The situation of "one person making $70,000 and being taxed less than a couple making $35,000 each" may seem unfair, but it's not the reality. There are a lot fewer $70K/yr jobs than $35K/yr jobs. More often, it's "a single person makes $50,000 per year, but all the couples nearby are making about $80,000-90,000."

With the dot.com bubble burst, I don't know any single people making $80K+ per year. But it seems that even during this recession, many couples have no trouble commanding six-figure household incomes. Guess who lives in the better/more expensive neighborhoods? Guess who just bought a new $30K SUV? I don't see this "marriage penalty" crimping couples' lifestyles...

Not only are couples living high on the hog, there are many financial advantages to being married, such as...
- ability to command much higher income levels, and therefore afford homes in more desirable locations. The single person may be able to afford a $150,000 home, while the couple could qualify for $270,000. In Austin, that's the difference between not being able to afford a decent place within an hour's commute and living in a 4,000 sq. ft. mansion just minutes from work.
- shared living expenses. A married/cohabitating couple's monthly living expenses are much less than 2X a single person's expenses. Housing and utilities are higher but spread two ways ... much less per person.
- diversification hedge against unemployment. Couples are less likely to be financially devastated by a year without work than a single person, because it is rare for BOTH halves of a couple to be out of work simultaneously. And even in that event, two people collecting unemployment can actually bring in decent $$$ while they both look for new jobs! A couple bringing in $2,200 per month in unemployment income is far better off than a single person bringing in $1,100 per month...
- lower car insurance rates. It seems lots of married couples pay less to insure 2-3 new cars than single people pay to insure just one beater...
- To move up beyond a certain level in many companies, you really have to be married to demonstrate "maturity" and "stability" to higher-ups. In other words, singles are kept underneath a 'glass ceiling.' Employment discrimination against singles is reinforced by putting married couples in a more 'upscale' social sphere, where business contacts are made. When single people lose their married friends, it's because the married friends are now "socializing with other couples" (i.e., they've moved up into that rarefied world).

 

[MarcVH]

No, it's not, and one person making $70,000 pays higher taxes than a couple making $35,000 each anyway. The "marriage penalty" refers to the fact that two single people each making $35,000 can pay less total tax than a married couple jointly making $70,000, and therefore for some people it will be advantageous for them to simply cohabit rather than marry.

 

[nolesrule]

Yup. The difference is in the standard deduction amounts per person. A single person gets a slightly higher deduction that a married person.

However, if you are able to itemize because of the mortgage interest, then the itemized deduction amounts might make up for that gap.

 

[Rob TT]

I have been with my girlfriend for over 3 years and bought a house together last January. She had no problem letting me put the house in mine and my Dads name(he co signed to get more money). I'm 24 and she is 21. I have no complaints about it. When tax season comes, I will take all of it because I pay for the entire house payment. She pays for food, utilities, etc...

 

[Ashley Seymour]

I have been with my girlfriend for over 3 years and bought a house together last January. She had no problem letting me put the house in mine and my Dads name(he co signed to get more money). I'm 24 and she is 21. I have no complaints about it. When tax season comes, I will take all of it because I pay for the entire house payment. She pays for food, utilities, etc...
Do you give her half the increase in value of the house?
This is why lawyers are sometimes a necessary evil.
I have heard the argument of what happens when two people break up or want to move away and the other party doesnt want to sell the house. Is this a whole lot different from a couple that marries and then in a few years faces a divorce? Plus with a high divorce rate, how is this a more stable relation ship than two unrelated people purchasing a house?