My boyfriend and I are planning to buy a house together, but the mortgage will be in his name. How can I protect my investment?
I bought my condo in 2008 for half the price for which my condo was appraised. Since then I have met my boyfriend and we had two kids so we are moving out of my condo.
My boyfriend and I are both business owners, so we are only allowed to get a non-traditional loan. His statement loans have been approved for the mortgage, so his name will appear on the mortgage. When we sell my condo, we will use the majority of that sale money as a down payment.
I would like to get a written statement before entering this new home together in case anything happens with our relationship, but I’m not sure how the property of the house should be divided if anything happens in our relationship. We probably won’t be able to redeem ourselves because of the price, so if we end up selling the house, would I be entitled to receive the initial down payment I made plus whatever we take out of the house? With the mortgage, we’ll pay 50/50.
âThe Big Moveâ is a MarketWatch column that examines the ins and outs of real estate, from finding a new home to applying for a mortgage.
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Now is definitely the time to have these conversations, and I’m happy to see that you and your boyfriend are. Buying a home with someone you are not married to can come with special risks, given the exact scenario you are concerned about.
When we buy a home with a spouse, we can take comfort in knowing that in the event of a divorce, there will be a clear legal path to unwinding your financial relationship. A judge or mediator can decide who keeps the house or how much of the proceeds from its sale goes to each person.
But if you break up with an unmarried partner or if a relationship with a friend or family member deteriorates, there is no clear legal path to resolving these issues. However, there are a number of steps you can take to protect yourself and your financial investment in this home.
For starters, just because the mortgage won’t be in both of your names doesn’t mean that the title or deed of ownership of the house can’t be. Sometimes even married couples choose to buy the house together, but only put one person’s name on the mortgage. After all, one spouse could have a much better or worse credit rating than the other, a more stable income stream, or less existing debt, all of which can help them get a better interest rate. or more attractive conditions.
The mortgage lender usually has to sign that you are not both “on the mortgage” – sometimes they will require both people to appear on the mortgage itself, but then only one will appear on the note, which is the statement that you promise to repay the loan.
According to the agency based in New York and Los Angeles law firm Spodek Law Group, for you as a non-borrowing co-owner of the house, if your boyfriend fails to make his mortgage payments on time, “the bank will still have recourse to sell the house for repayment.”
If both of your names are on the title of the house, you both own it, regardless of who is on the mortgage. A mortgage lender can block attempts to add someone to title to the house after the fact, so it’s important to get things straight up front. (The way your names are written on the deed may have implications for what happens if either of you dies, but that’s a separate issue.)
After determining the best course of action in terms of title and mortgage, you should also consider drafting a cohabitation or condominium agreement before purchasing the home. I recently recommended this to a retiree whose daughter offered to build a house and move in together.
“Many couples are reluctant to discuss the ‘what if’ scenario we break up,” Kiki Manti Engel, an attorney at the Southern California law firm Reid & Hellyer, written in a blog post. “However, it is vitally important for unmarried co-owners (or cohabitants) of real estate to have a written agreement in place to protect themselves.”
The written agreement can specify how the property would be divided in the event the two of you choose to separate, and you could specify that you would keep the amount used for the down payment if the house was sold later, since it was funded using the money you earn from selling your current condo. A document like this would hopefully prevent a legal battle from ensuing if this unfortunate scenario were to occur.
So go ahead and hire a lawyer to walk you through this – and while you’re at it, since you both have kids, be sure to update your will to reflect how the property would be. shared between them if you and your boyfriend were to die. Good luck on this exciting new chapter in your relationship.
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