Title And Mortgage
Today, it is common for couples to buy a house together before they are married—and there are some very important things to discuss before doing this.
There can be a lot of variables, depending on how the couple wants to split up the down payment vs mortgage payments and who is (or isn’t) on the title. In some instances only one of the partners might be on the title. However, if both partners are on the title, most lenders want both partners to be signed on to the mortgage so they are both responsible for the debt of the house.
Even if one partner pays the down payment up front while the other partner pays the mortgage payment, the lender will likely require both partners to be on the mortgage even if one is on as a co-signer. This is something that should be discussed and understood prior to purchasing a home together.
Who Is Entitled To What?
When dealing with one of the biggest assets in your lives, things can get sticky upon the unfortunate scenario of a break up. It is important for both partners to understand their rights and what they are entitled to in regards to real estate.
If you are married you are entitled to 50% of your home’s value, even if you are not on title. This is not the case for cohabitating couples. If one partner of a cohabiting couple has purchased a home and is on title and the other partner isn’t, the latter’s contributions would be seen as rent payments and they would have no right to the home upon separation. In these situations a cohabitation agreement could be entered into that outlines how expenses will be split up, and how the home value will be divided if the couple splits up or if one partner passes away.
Another option to avoid confusion for who gets what is to rent out the existing home and purchase a home as a couple. This option not only solves the issue of who is entitled to what, it could better set up your financial freedom in the future.
Once a couple has been living together for 3 years in Ontario they are considered common law (although if a couple shares a child, common law status begins at 1 year). This can change who is entitled to what, so it is always smart to speak with your lawyer before entering in to something you do not fully understand.