Written By Christine Thomasos
Nothing says “I’m grown” like property ownership. When you’re married, home ownership becomes #couplesgoal. But that doesn’t mean unmarried couples aren’t thinking about making big moves to own property. That begs the question: should you buy a property with your significant other before marriage?
Whether you’re looking for somewhere to live or have big plans for a commercial space – rent is anything but cheap. Property ownership is an appealing option when you can trade those rent prices in for a lower mortgage payment. At the end of the year, deducting mortgage interest from income taxes is an added bonus that may have some unmarried couples questioning what’s holding them back from owning property together. But, every couple should consider three important things if they’re going to buy property before getting married.
- It’s a High-Risk Business Deal
People want to own property for different reasons. Real estate can become a strong stream of passive income, but that hits different for unmarried couples. While a married couple buys an asset as a unit in the eyes of financial institutions, there’s a different understanding for other couples. An unmarried couple who buys property is essentially entering into a business deal.
Unmarried couples can’t apply for a mortgage the way married people do. They have to apply for their property mortgage separately. Factors like credit score, income, employment history, and debt-to-income ratio can make or break property ownership dreams. It’s common to see one partner with a stronger credit score or less debt step up to apply for the property for the couple. This could work in favor of the couple who wants to get competitive interest rates, but it could also mean they’ll qualify for a lower loan amount with one income instead of two.
Let’s be real – big investments come with big risks. Buying property is a huge investment, and jumping into it with someone who isn’t legally tied to you heightens that risk. What happens if a couple breaks up? What if someone loses their job or has a financial emergency? The person whose name is on the property title is going to take full responsibility for repaying it in the eyes of the bank.
- Property Laws Protect Married Couples
Buying real estate isn’t an easy process, regardless of who you are. But, an unmarried couple is going to jump through even more hoops to secure their investment. There’s something even more complicated than having to go through this process – separating your property assets when you’re not married.
Property laws weren’t created to protect an unmarried couple’s assets the same way they do for married couples. If things go bad for an unmarried couple, there’s a chance one person may take more of a financial hit than the other. That’s why financial experts on business pages like Forbes and Money magazine encourage unmarried couples to work with a real estate lawyer who will help them protect their assets with a legally binding agreement similar to a prenup.
- Numbers Don’t Lie
Property ownership is directly tied to wealth, and homeownership is one of the most popular forms. The National Association of Realtors Research Group reveals the link between wealth gaps and homeownership in the Black community.
“Given that homeownership contributes to wealth accumulation and the homeownership rate is lower in minority groups, data shows that the net worth for these groups is also lower,” the research group revealed in a study called the 2022 Snapshot of Race and Home Buying in America. “At $188,200, the net worth of a typical white family was nearly 8 times greater than that of a Black family ($24,100) in 2019.”
We see even more proof of these disparities in a U.S. Census Bureau study called the Quarterly Residential Vacancies and Homeownership report, which reveals that Black households have the lowest homeownership rates in the country at 44.7 percent, behind White households with a 74 percent rate of homeownership.
“For homeownership rates by race, the first quarter 2022 homeownership rate for non-Hispanic White alone householders reporting a single race was highest at 74.0 percent,” the study states. “The rate for Asian, Native Hawaiian, and Pacific Islander Alone householders was second at 59.4 percent, and the rate for Black Alone householders was lowest at 44.7 percent. The homeownership rates for each race category were not significantly different from the first quarter 2021 rates.”
Like the great scholar, Shawn Carter once said, “men lie, women lie, numbers don’t.” The majority of the homeowners representing the Black community are married couples who make up 51 percent of homeowners, followed by single women at 33 percent and single men at 10 percent. Unmarried couples make up five percent of Black homeowners in the Race and Home Buying study. These couples have to face more risks and a lengthier process that includes hard conversations and legal contracts.
So let’s get back to our question, should you buy a property with your significant other before marriage? Even though a lot of financial experts would advise against it, that’s a serious decision every couple needs to make for themselves. What’s important to remember is property ownership is one of the biggest investments anyone can make, whether single, coupled up, or married. Doing the research, having tough conversations, and seeking legal counsel will help you get closer to making the best decision for your future.