Buying your first home is always exciting – and perhaps you and your partner are not married but wish to buy a home together. This is called cohabitating and there are benefits to sharing the financial burden of homeownership – such as lower down payments and increased affordability.
Although it’s not always the case, you may be splitting the mortgage and down payment down the middle. Often, there is one partner, however, who brings more financially to the transaction than the other partner. Banks, it should be noted, will expect each partner to co-sign any debt on the property, regardless of how much downpayment each partner made.
Marriage and common-law are different. If you are married to your partner, regardless if you’re on title as the owner or not, you are entitled to 50% of the home’s value. With cohabitating partners, this is not the case, and why unmarried couples should co-own any property even if one partner has contributed more financially. Consider this – in a cohabitation situation, in the eyes of the law, only the person listed on title is the owner, and the other person would be seen as paying rent to the owner.
Get a Co-habitation Agreement. This legal document between two individuals who are unmarried who want to live/own property together will spell out all the details of down payment, title, and mortgage(s), plus how expenses such as taxes, repairs, condo fees and utilities will be handled. It will also deal with the unpalatable situation if one of the partners dies, or if the couple splits up, in terms of how to divide the property (ie. will it be a 50/50 split, or one person buys the other out, etc.) If the relationship ends, this is a very, very important agreement to have in place and must be deemed reasonable in order to be considered valid.
For more on this topic, click here for 6 Questions to Ask Before Moving In Together