What the experts say: Should you buy a home with someone you’re not married to?

Peter Warden
The Mortgage Reports editor

Is homeownership romantic? Or a business decision?

Should you buy a home with someone you’re not married to? That question means different things to different people. Perhaps you’ve already set the date for your wedding. Or you might never want to marry. Or maybe you have no romantic attachment at all.

Find current mortgage rates for all types of ownership (Sep 19th, 2020)

Atypical situations mean more hoops

Whatever your personal circumstances, you’re at a disadvantage if you buy a home with someone you’re not married to. That’s because marriage automatically includes legal protections. And those should protect both spouses’ interests.

However, it’s not too hard to protect yourself with legally binding agreements that anticipate and address possible future issues. Of course, too few home buyers do that. But that doesn’t mean you can’t.

Dave Ramsey

Dave Ramsey doesn’t seem to agree with that last paragraph. Ramsey’s says flatly, “You should not buy a house with your girlfriend. You should not consolidate your assets until you’re married. If you’re not ready to get married, you’re not ready to buy a house together.”

“Picture buying a house with someone to whom you’re not married. When the break-up happens, you’ve got a mountain of a headache to deal with. Whose name is on the deed? Does someone want to stay in the house, or should you sell it?

“Who gets the money from the sale, and how much? Good luck if you have to do a short sale … both your credits will be trashed, and you’ll be dealing with the consequences of it for years.”

Suze Orman

Suze Orman addresses those drawbacks directly. And, as long as you anticipate these same issues, you’ll likely be able to address them. For example, she suggests that those buying a home with a life partner or spouse should explore the advantages of buying under a Joint Tenancy with Right of Survivorship (JTWROS).

“I think JTWROS is the best way for you and your spouse or partner to take ownership of your home,” she says. “With this agreement, you both have an equal share of the asset and when one of you dies the survivor automatically inherits the deceased’s portion of the asset.

“With a JTWROS agreement, the surviving ‘owner’ won’t need to go through the time consuming and expensive probate court process. A nice added benefit of JTWROS is that the deceased’s half of the asset will be given a step-up in cost basis, which will minimize the survivor’s tax bill if he or she decides to sell the home.”

For “just friends” and family

Take note that Orman’s talking about people in marriages and quasi-marriages here: those in romantic relationships who expect to live together forever. In those circumstances, you want to protect the person who survives you.

But suppose you have a different sort of relationship. If, say, you’re buying a place with an old pal or a former college roommate. Or perhaps you’re a mother and her single daughter. Maybe you’ll want to see your interest in the home pass to your estate. Then all your chosen heirs will get their share.

You wouldn’t then want a JTWROS. You’d need an agreement (perhaps a tenancy in common) to sell the home sold when you die. That might be to the person you shared with if she can afford to buy out your share. Or it might be on the open market.

If you want your heirs to eventually get your share of the home’s value, but for your co-owner to be able to stay in residence for her lifetime, you might consider a Qualified Terminable Interest Property (QTIP) trust.

David Bach

“I don’t want you to wait. I want you to be thinking about buying real estate sooner versus later,” advises David Bach. He describes homeownership as “the ultimate escalator to building wealth.”

True, he isn’t there specifically targeting his advice at unmarried couples or co-owners who have no romantic relationship. But his views seem as black and white as Dave Ramsey’s — though very different.

He reckons you should get onto the home ownership ladder as soon as you can because “People who own real estate get rich.”

Gail Vaz-Oxlade

Gail Vaz-Oxlade highlights a common issue that many face. Should you buy a home with someone you’re not married to when there’s a big disparity in your financial circumstances?

That depends of just how messy the other party’s finances are — and how much you’re prepared to invest in your new relationship. One thing’s for sure: you don’t want to buy a place with someone who may be unable to make the contributions you need to keep up with your mortgage and the other costs of homeownership.

Related: Costs of owning a home: what to expect the first year

Is your partner a financial train wreck?

This becomes critical if you’re unable or unwilling to subsidize your co-owner.

For instance, one follower asked about this potential purchase: “I just started a new serious relationship with a 50-year-old woman. I am debt-free and advocate your financial philosophy.

“However, this new lady of mine has opened up as to her true financial situation. She has a good secure career but has considerable debt because she is too generous to ex-spouse, siblings and her adult children. She has been given poor financial advice in owning investment rental real estate.

Any advice as to how to approach this situation without chasing her away, but I do not want to support her while she is debt-laden. Thank you in advance.

 And Gayle said the gentleman was sensible to be concerned. “I suggest,” she recommended, “That you keep your finances separate at this point in your lives. Figure out what it’ll cost for you to share your lives together and then you can each contribute proportionately to the common pot to pay for those costs.

“Everything else including debt, ex-spouses and children, are dealt with on an individual basis. Would that work for you?”

Clark Howard

Clark Howard may have the best advice of all if you want to buy a home with someone you’re not married to. He urges you to hope for the best but plan for the worst.

“If you do buy a home together with someone you’re not married to, you need to have some kind of written agreement what you do while you’re living in that home,” he says.

“And if you decide to split up, who’s responsible for what … who’s going to stay and how you’re going to handle either disposing of that house or the other person ending up with ownership of it. You’ve got to protect yourself.”

That may well involve having an attorney draw up an agreement that settles future disputes in advance of them arising. Think that’s too costly? Just imagine how much you’ll be in for if your friendship or relationship falls apart and there are endless grounds for legal squabbles.

The one theme here from all the experts? That buying a home without the legal protections of marriage is not something to be done lightly — no Champagne involved until after you’ve done your analysis protected yourselves legally, and closed the deal.

Verify your new rate (Sep 19th, 2020)