Buying a new home is a huge step for any married couple. Not only will they be spending to make sure they have a roof over their heads; they will also put their money in a sound investment that could potentially earn them more money in the future. For unmarried couples, however, simply getting towards that step could prove to be more difficult, particularly in terms of finances. Here are four common mistakes made by couples who decided to buy a house before they tied (or without ever tying) the knot.
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Two people who are romantically involved with each other may be so in love that they fail to see their relationship can go either one of two ways. The reality today is that partnerships—romantic or otherwise—also face a high likelihood of dissolution even if those involved are so confident in their compatibility with their significant other that they believe ‘happily ever after’ is inevitable, even if they decide against ever getting married. Careful consideration of the possibility of a break-up should be done by any unmarried couple prior to purchasing a house or any other property for use by both members. Doing so will spare them of any further problems later on, not the least of which is the huge financial and emotional burden of having to deal with the result of a choice they made during happier times.
A real estate broker might provide a good selection of homes in a specific area and a mortgage broker might help you and your partner land favourable rates among available lenders, but buying and owning a home involves a lot more. Specifically, there are some aspects of home ownership that have far-reaching legal implications, which is especially true in the case of partners who are not legal spouses. You should ask a lawyer for help in drafting a cohabitation agreement which outlines your and your partner’s rights and responsibilities with regard to the house you decide to buy. It will also serve as a guide on who pays for the mortgage, maintenance, and other associated items as well as how the property will be divided if you decide to part ways.
Sure, you and your partner may have done the numbers and you are confident you are both earning enough to cover the mortgage payments. However, mortgage is just one of the things you shoulder when owning a house. Will you and your partner have enough money set aside for leaking pipes, flood damage restoration, or any other emergency expense? It would be a lot better for you to plan ahead for such events and end up not having to spend on fixing them than to encounter these problems unexpectedly and with an inadequate budget.
In a relationship, wherein the partners are not legal spouses, it is possible for only one of the partners to have a good credit history. Couples who face this dilemma often commit the mistake of putting both their names on the deed but only the name of the creditworthy partner on the mortgage. The result is two people owning the same asset but only one person shouldering the liability. This could present problems for a couple applying for a home loan as banks are likely to consider them a lending liability even if just one of the partners has a stellar credit rating. To avoid the hassle, you and your partner should be aware of your combined credit score and work towards improving it before even setting your sights on the house that you want.
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