The Definitive Guide For Buying a House Before/After Marriage

The Definitive Guide For Buying a House Before-After Marriage - Real Estate India

All lovebirds need a nest, and nowadays you and your significant other don’t need to wait to tie the knot before you purchase a house to roost together. Here is The Definitive Guide For Buying a House Before or After Marriage

The Definitive Guide For Buying a House Before-After Marriage - Real Estate India

Thinking of Buying a House Together Before Marriage?

Best wishes on your upcoming wedding. One of the questions I am sure many engaged and unwed couple ask whether they should buy a house before getting married or wait to buy until after the wedding?

Buying a house before marriage is something that should be given a considerable amount of thought. According to recent study by Coldwell Banker, found that quarter of younger couples – those between 18 and 34 – are buying a home before they get married.

If you and your partner are considering a home purchase, it is essential that you take appropriate steps to protect yourself during and after the purchase.

Thinking of Buying a House Together Before Marriage - Real Estate India

Buying a House Together: What Unmarried Couples Need to Know

Heartfelt young couples used to mark their commitment to each other with an engagement ring, but now they’re in the market for a bigger asset: a set of shiny new house keys.

  1. Current Finances
  2. Compare Credit Scores
  3. Future Finances
  4. Types of homes
  5. Open a Joint Bank Account
  6. Title Options
  7. Consider Making Your Promise a Legally Binding Agreement

1. Current Finances

Before you and your partner begin with house-hunting, exchange personal financial information, including salaries, debt (student loans, credit card balances, car payments, etc.) and credit scores.

Discuss your personal financial situation with your partner to determine your budget. Think about your short-term and long-term financial and lifestyle goals, such as having children and being able to relocate for a job. Determine how you will fund the down payment and closing costs, which must be paid in cash.

If things go unpleasant, this can put you in a terrible spot. For this reason, many financial advisors recommend not to buy a home for more than one person’s salary. If there is a breakup, you would still be able to afford the mortgage even if only for a short time. Again, this is where discussing finances before purchasing becomes very important.

2. Compare Credit Scores

You and your partner have probably already shared details about your salary and savings when determining if you could afford to buy. But another piece of information you’ll need to share well in advance of closing is your credit score report.

As a married couple, your scores could be lumped together, but as an unmarried couple, they can be considered separately if necessary. You have the option of having the person with the better score apply for the mortgage, thus avoiding the drag of the lower credit score on the loan terms.

But keep in mind that when the person with the better score takes out the loan, it is only his or her income that is taken into account for the home purchase. The single income will need to be enough to pay the mortgage – which may or may not be a problem in your circumstances.

3. Future Finances

Before setting up a house budget, both partners need to have an honest conversation about the amount of debt they’re comfortable living with.

Money problems are one of the leading causes of relationship troubles, for married or unmarried couples.

Just because you can borrow the maximum amount doesn’t mean it’s a good idea. Extend your joint budget too far, and any unexpected expense will likely have one of you coming up short when the monthly payments are due.

These include:

  • Down payment
    • Between you and your partner, one of you maybe in a better position to put towards the down payment. Or you may put in equal amounts. However, you arrange the down payment, be clear about who is putting down how much, and what that means over the long-term – such as if you sell, or break up.
  • Mortgage Payments
    • How much will you and your pay towards the mortgage? Most of that couples have unequal mortgage payment arrangements due to differences in income, but again, you need to discuss what that means concerning each of your equity over time. Not talking about financial issues like these can cause unwanted stress down the road.
  • Fees
    • There are a lot of other costs that come up beside the down payment and mortgage payment. For example, you may need to pay homeowners association fees. Depending on your down payment, you might need to pay mortgage insurance. Property taxes are another fee that can be pretty substantial in specific areas etc.
  • Maintenance
    • One of the most significant costs of homeownership that new home buyers are not prepared for is maintenance and repair costs. The water heater breaks, the stove stops working, the fridge goes out – you need money to pay for these things when they happen. Will both of you cover these costs equally? If not how will these kinds of expenses be divided?
  • Upgrades
    • Home upgrades may come a few years down the line, but when they do, you want to know who will pay for them.

Tip:

If you’re not taking 50/50 ownership shares,you  should get that in writing. Should you or your partner ever end up in court, judges usually assume home owners have equal shares unless the deed or other documentation says otherwise.


4. Types of homes

When looking to buying a home before marriage, it is essential to you and your partner to get on the same page about what you both want.

This not only includes home buying but below considerations as well:

  • What type of location –  big city, little town or a home outside the city?
  • What type of home – a re-sale, new construction, an antique, fixer upper?
  • What price point – a detailed discussion of where your comfort level lies. The mortgage broker may say you are qualified to purchase a lot more than one party is comfortable with.
  • What kind of neighborhood – once the location is narrowed down, you’ll need to decide if you want a large subdivision, country road or busy street. One partner might have a strong preference for one or the other. See the guide on how to pick a neighborhood.
  • What about schools – if you are planning on having kids together, the school system could become a major consideration.
  • Is commute relevant to one or both parties – understanding location needs is important when buying a home together.

Remember you both need to be on the same page so that one party isn’t left feeling uncomfortable.

5. Open a Joint Bank Account

Consider setting up a joint bank account, if you don’t already have one, that can be used to pay the mortgage, property taxes, insurance, maintenance and other house bills.

Many financial advisors suggests you, might want to automatically have a certain amount of money from individual accounts deposited monthly.

By doing so, neither you or your partner forgets creating money arguments in the future on who paid what. Each side would have a set amount deposited each month into the joint account.

6. Title Options

Once you and your “better half” create a budget and decide how to split the costs of buying and maintaining the house, consider how you will own the home, or“take title”.

Here are the three basic options:

  • One person can hold the title as sole owner.
  • Both people can hold title as “joint tenants.”
  • Both of you can share title as “tenants in common.”

You might be tempted to pay scant attention to this issue, but that could be a very expensive blunder.

7. Consider Making Your Promise a Legally Binding Agreement

Although marriages, unions and partnerships start out mellow, sometimes couples lose their focus and wander off in separate directions. For that reason, it’s a good idea to put all financial agreements into writing.

Making your agreement legally binding means, you are both serious about doing what you say you will do. You can always change the deal if the situation changes. Talking with a lawyer before a big business/financial decision is still recommended.

Some of the most prominent disagreements can be avoided when you have an agreement in place to spell out each other’s obligations.

Thinking of Buying a House Together After Marriage?

In many instances engaged couples are often bombarded with choices — from color schemes to seating arrangements to cake flavors. One choice, perhaps the most daunting one, isn’t whether to go with beef or fish, though. It’s whether to buy a house before or after marriage.

Thinking of Buying a House Together After Marriage - Real Estate India

Marital status is not the most important factor which couples should consider when deciding when they should buy a house. Instead, couples should focus on their partner’s financial history, creating a realistic budget and considering worst-case scenarios regarding their relationship.

  • In most cases, a single partner’s income restricts his/her chances of investing in a property of choice. A co-applicant can save the day in a scenario like this.
  • For working spouses, co-borrowing of home loan can be an effective method to save on taxes. Under the I-T Act, co-borrowers individually enjoy tax deductions on Rs 1.5 lakh per annum on the principal component and Rs 2 lakh per annum on interest component on a home loan.
  • Most states charge a lower stamp duty if a property is registered in the name of the woman of the house. Across states, women have to pay about two per cent less as stamp duty charges for property registration.
  • In case of single ownership of property, distribution of assets might be complicated after the demise of the owner. In case of joint ownership, the surviving member preside over the succession strategy.

As per amendment to The Marriage Laws (Amendment) Bill 2010, any property acquired by husband after marriage by default, the wife will have 50% right in such properties in case of a divorce. The Marriage laws provide financial security to wife. To secure wife’s interest in case of any unfortunate event, Husband can execute WILL in her favour.


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