Financial Experts Share The Big Mistake Couples Make Before Getting Married
The common complicated situation young couples experience and how to avoid it.
Monkey Business Images via Shutterstock You may be itching to take that next step in your life and your relationship by investing in a house (or condo, co-op, etc) together. This is a special opportunity, as the ability to buy a first home in your 20s and 30s is becoming increasingly rare.
However, you can save yourself a lot of heartache by avoiding the newer trend of buying a home together before you are married, a trend that began picking up speed in the 2010s. And although more and more couples are making this enormous financial commitment, it's important to go into it with your eyes fully open and prepared.
Here are 3 reasons not to buy a home together until you're married:
1. No marriage contract means you need more complicated financial contracts in place.
The major difference between dating and being married is a commitment to one another for life, contractually. It is truly, "Signed, sealed, delivered — I'm yours!" without that marriage contract, financial arrangements are murky and messy.
In fact, a New York Times article reports that "real estate lawyers say that there are more complications for unmarried property owners who part ways than there are for married property owners who divorce — and a less clear process for resolving them."
"By default, our laws are suited for married couples acquiring assets," says Luigi Rosabianca, a real estate lawyer in Manhattan. So if you are not willing to commit to each other for life yet, then entering into a financial commitment — like buying a home together — is a bad move right now.
2. You will be married to your partner's credit.
When unmarried couples enter into a financial contract — like a home purchase — both credit scores are affected by the success of that joint agreement. If your boyfriend decides he's done with the relationship, his credit is now attached to yours because you share a mortgage. Getting his name off of the mortgage can be a major legal battle and more difficult than getting that sofa-sleeper or finding a new place to live.
According to Realtor.com, if one party defaults on the loan, it affects each borrower's credit score negatively and could lead to foreclosure, which drops your credit score by 100-300 points and negatively affects it for seven years.
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3. Your breakup will be even more complicated.
If you think breaking up is hard, try it with a home-sized asset right in the middle of it. Your heart is broken, your dreams are shattered, and now you have to decide: Who stays and who goes? Do you have to split the proceeds of the sale? How will you be reimbursed if you have already invested in home improvements — like new sod, a sprinkler system, surround sound speakers or a fresh coat of paint? You'll likely need to hire attorneys to deal with the contracts you may have signed in order to jointly own the property.
Dr. Thomas Bradbury, a PBS relationship expert reports, "Partners in cohabiting relationships … report higher levels of aggression in their relationships and more problems resolving disagreements."
What to do instead of buying a home together before marriage
We want your relationship to last for the ages — longer than a 30-year mortgage. So consider this advice before entering a complicated contract.
One partner is the owner, the other is a renter
One clear option is for one of you to buy the home with a very clear understanding of who owns it. The other partner can pay rent, with a typical rental contract in place (security deposit, first and last month's rent, clarity of which utilities are owner's vs. renter's responsibilities, etc). Renters do not believe they have accumulated ownership over their rented home, and it should be similarly clear with the non-ownership partner paying rent.
Yes, it will still be messy if you break up, as one of you will own a home and the other will not, but you won't need lawyers to help divide assets (hopefully), and that will save you an enormous amount of money in the end. In addition, if the ex-partner who owns the property falls on bad financial times, the non-ownership partner doesn't need to absorb these credit problems.
Wait until you're married to purchase the home together
Or, wait until you're married to buy a home! Then, you can celebrate your commitment to your marriage, your future, and your home with "his and hers" monogrammed mugs for your new breakfast bar.
The Money Couple helps others achieve financial freedom while putting family first. They offer services and resources to bring couples closer together, not only in their marriages, but in their finances as well.