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Will Your Home Outlast Your Relationship?

Breaking up can have greater financial consequences than emotional repercussions for unmarried homeowners.

The joy, bliss, and financial security of home ownership are tempting enough for some unmarried couples or friends or relatives to dive into purchasing a home together, with no qualms about the future. To even consider the ramifications of your relationship unraveling seems to question your commitment. So why be prepared for a breakup and the sale or dissolving of your happy home? What's to be gained by being pessimistic? How about avoiding the ruination of your credit rating and steering clear of financial hassles beyond your worst nightmare. 

Joint ownership can work successfully under most circumstances, if you prepare for the contingency of selling. It's just a simple way to clarify what happens to your respective interests in the home should something unforeseen happen, not just a breakup but the worst case scenarios such as illness or death that no one expects. And look at it this way, you wouldn't want to be stuck in a situation because you're afraid of losing the home or your shirt, would you?

Single couples or friends and relatives typically have no problem purchasing homes. Lenders are more than willing to provide mortgages when people merge their savings and buying power. That partnership makes coming up with a down payment and monthly mortgage payments much easier and much less risky for a lender than if either person tried to go solo. Although the path to financing is smooth, the law is full of potholes when it comes to unmarried couples. Typically when a spouse dies, the surviving spouse automatically becomes the full owner under joint tenancy with right of survivorship. And the divorce settlement provides the framework for deciding ownership. That's not true for unmarried couples. Without some plan or document, the death of your housemate does not make you the automatic owner. And if you break up, you're in uncharted legal territory and really ripe for disagreements over who's responsible for costs, who gets to stay, or how to divide sale proceeds.

So what are best solutions? First, consider sole ownership. If one person is coming up with the lion's share of the costs, consider putting only that person on the title. If you insist on putting both names on the title, you have further options to clarify what happens on the title in the event of death or a breakup. Under title as tenants in common, what happens to the home is determined by the deceased person's will. Under joint tenancy with rights of survivorship, the survivor becomes the sole owner and responsible for mortgage.  

Beyond that, you can get down to the fine print in a partnership agreement.  This document spells out how the home sale would be handled in a breakup.  For example, you can establish ground rules in case one partner wants to stay and buy the other out, including the exact purchase price of the other's interest in the home. Or if one partner leaves the other in the lurch paying for the mortgage, the agreement might call for the home to be sold. Such agreements may require the two co-owners to use a mediator instead of going to court to resolve any disputes. 

Sources used to create this article include Mary Shanklin and the Orlando Sentinel.