Buying a home involves a significant financial commitment. Not only does a homeowner have to be concerned about mortgage payments, but they must also consider taxes, insurance and maintenance requirements. There are also legal and tax implications that are part of home ownership. When a married couple decides to buy a home, they make a joint decision based on their current living conditions and their financial status. When unmarried couples or friends decide to buy a home, there are many additional things that must be considered.
One of the first considerations when purchasing a home with a non-spousal partner is the issue of ownership. While most couples will purchase a home as joint tenants with rights of survivorship (JTWROS), this option may not be the best option for non-married home buyers. Because of the legalities involved in how a deed is recorded, it is important that unmarried co-owners research property ownership types before making a final decision.
Down payments, mortgage interest credits, property upkeep and other expenses should be agreed upon before buying a home with a non-spousal partner. These financial issues can have long-term implications for homeowners since they may also impact the rights of one owner to claim deductions on their taxes. In addition, these matters may also have consequences in the event that the co-owners decide to end their relationship and split the property at a later date.
Stopping problems before they start
One of the best ways to avoid problems when purchasing a home with a non-spousal partner is to have a written agreement that covers issues that may arise later. Some of these include:
Tax deductions – Specify which partner may claim mortgage interest deductions. This may be broken out to offer a percentage to each co-owner or all to one co-owner.
Property disposition – Agreements should be made that covers what happens in the event that one party no longer wishes to be a co-owner. The terms should be clearly laid out and explain whether the co-owner is entitled to buy out the other owner(s) or if the property must be sold.
Responsibility to property – When agreements are created they should also include who is responsible for maintenance, taxes, insurance, etc. This can help prevent problems that may occur down the road.
Buying a home is a tremendous responsibility in numerous ways. Failing to have a clear understanding between unmarried co-owners can be a costly mistake. Having a solid plan in place in the event that the relationship comes to an end can save a lot of legal and financial problems. Remember, that all agreements should be in writing for the protection of all parties.