Partners in Life, Partners in Home Buying
RENEE MONTAGNE, host:
On Fridays we talk about your money. Today, mortgage before marriage. The vast majority of home buyers are married couples. But in the past ten years, there's been a 50 percent increase in the number of unmarried couples and friends living together who own their own homes.
As Shia Levitt reports, these joint investments can lead to some messy situations if the owners split up.
SHIA LEVITT reporting:
The hardwood floors have just been finished in Sarah Garber(ph) and Dan Wolf's(ph) newly purchased San Francisco home. Today their construction projects include sawing off the legs of a doorjamb to adjust its height.
(Soundbite of power saw)
LEVITT: Garber and Wolf are in their mid-30s and have been living together for about six years. Like many of their friends, they felt no rush to get married, but they did feel pressured to buy a home last year before interest rates went up. Wolf used trust fund money to pay half the down payment, and with loans and savings they split the rest. For the monthly mortgage, they worked out a system they both think is fair.
Ms. SARAH GARBER (Homeowner): We're both going to be paying into an account from which the mortgage payment comes out. So it's pretty 50/50. It might be slightly prorated in terms of our incomes aren't equal.
LEVITT: Across the country, about 2.7 million homes are jointly owned by two or more unmarried people. Most of these are in urban areas where real estate is more expensive. Walter Maloney is with the National Association of Realtors.
Mr. WALTER MALONEY (National Association of Realtors): In the higher cost housing markets, unmarried couples and friends may be more inclined to purchase together simply because of the affordability situation, wanting to get into the market while interest rates are still relatively good. Because the sooner you get into the market, the longer you own, the better your investment.
LEVITT: But unmarried homeowners can face big difficulties if and when they separate. Experts say most joint homeowners never write up a cohabitation contract - the unmarried equivalent of a prenuptial agreement - when they purchase a home. Without a contract, the default property laws that apply are significantly different than those for married homebuyers.
California property lawyer Roger Meredith says the few property disputes from unmarried couples he gets each month are often among the most complicated.
Mr. ROGER MEREDITH (Attorney): They are personal relationships as opposed to an arms-length business relationship. And when they end the relationship, there aren't any laws that apply that are specific to how you divide the property when these folks have treated it as though it was marital property. But it isn't marital property.
LEVITT: Married couples are governed by family law, which in most states says that property acquired during marriage would be shared equally, regardless of who holds the title. Unmarried couples and friends, on the other hand, are usually governed by general property laws, which often rely more heavily on whose name or names are on the title. Meredith says neither law adequately applies to this growing segment of the home-owning population.
Mr. MEREDITH: The laws have just not kept up with what has happened, and it needs to. And the legislatures should address these issues. Somebody's got to straighten out who has the property in what percentages. And ultimately if there are no guidelines, the courts end up doing a lot more of these than would otherwise be necessary.
LEVITT: Same-sex couples have always had to deal with joint home ownership outside marriage, but a handful of states that have civil union or domestic partnership laws, like California, Vermont and Connecticut, allow registered couples to automatically fall under marital property rules.
(Soundbite of hammering)
LEVITT: Garber and Wolf are standing in the doorframe of what will soon be their upstairs linen closet, finishing today's construction.
Garber and Wolf are unusual among their group of friends in that they took the extra step of signing a contract that details what would happen to their assets in the event that they break up.
Ms. GARBER: It's a big financial commitment. I mean I think even if you're married you should think of those things. I mean, it's just realistic.
Mr. DAN WOLF (Homeowner): Yeah. It's just part of being in a relationship together. You have to think about, well, what if this doesn't work out.
LEVITT: Those what-ifs may seem unromantic, or even unfriendly, but lawyers and real estate agents say it would be wise for everyone going in on property with another person to consider them before they find themselves needing a lawyer.
For NPR News, I'm Shia Levitt, in San Francisco.
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