Many couples are choosing to buy homes together before tying the knot in order to maximize their finances, gaining equity in a home sooner. However, there are a few differences for buying when you are married vs an unmarried couple. In this article, I share 3 topics that will help you be more prepared and have a better home buying experience before you are married.
Types of Ownership
- Joint tenancy is when you and your partner hold the title to the home with equal rights to the property during your lives. If one partner dies, the home transfers to the surviving partner without having to go through probate or be dedicated in a will. The majority of couples chose this type of ownership.
- Tenants in common is when you and your partner hold the title together, but with financial percentages of ownership. The pros to this is that it allows one owner of the home to use the equity created by their share of the home as collateral for financial transactions and creditors can place liens only against the owner’s portion. However, this type of ownership does NOT automatically transfer if someone passes away, and would need to go through probate.
- Another option is that you could choose is sole ownership, where only one of the partners purchases the home. However, in the state of Minnesota, if you get married before selling this home, the other partner would need to sign off on the title.
I am not a lawyer and cannot provide legal advice on the best type of ownership for you and your partner, but am happy to connect you to a lawyer that can give you further advice.
The incentives to buying a home, even before marriage include:
- Tax breaks like deductions from your mortgage interest, discount points, and even your property taxes.
- You and your partner can also gain equity sooner and faster. Home prices in the Twin Cities have risen over the last few years and are projected to increase another 3-6% by the end of 2023. Buying a home now allows you to put your money towards something that you own rather than rent, and take advantage of the equity gained in the long term.
Flexibility in mortgage financing options
Buying a home before you are legally married can give you more flexibility in your financing options. For example, if you or your partner have too much student debt to qualify for a competitive loan, the other partner can apply for financing as a single person (aka sole ownership). However, this also means that only one income will be used when qualifying for the financing, and if you split up there is no right of ownership for the other partner. It is best to speak with a lender or personal financial advisor to see what would be the best set up for you.