Unmarried couples buying a home

In the not so distant past, the typical homebuyer was a married couple. But today, there’s a huge increase in the number of unmarried couples who are buying a home together.

It might not sound very romantic, but it’s a good idea for such couples to think about what their financial obligations will be regarding the home, and what would happen if they were to split up at some point in the future.

For instance, you might want to consider signing a “cohabitation” or “domestic partner” agreement. This is a legally binding document that says who will pay what portion of the mortgage, property taxes, insurance, maintenance and other house-related expenses. It can also say what will happen to the property if you and your partner decide to go your separate ways.

Another way to protect yourself is to understand the different forms of property ownership. For instance, if you own real estate as “joint tenants,” then you each own 50% of the property. You can’t leave the property to someone in your will; if you die, your share of the property automatically goes to your partner.

On the other hand, if you own the property as “tenants in common,” then you can have whatever percentage interest you want. One person can own 61% of the house and the other can own 39%, if that’s what you want. In theory, the 39% owner could sell his or her 39% share to someone else (although it’s hard to imagine someone wanting to buy 39% of a house). You can also leave your 39% share to someone other than your partner in your will. If the house is sold, your heir would be entitled to 39% of the proceeds.

You might want to sign a “tenancy in common agreement,” which is similar to a cohabitation agreement. Such a document sets out who owns what percentage, clarifies the couple’s financial obligations, and spells out each person’s buying and selling restrictions and duties in the event of a split-up.