Buying a home together before marriage: What to consider

Over the past two decades, the number of American adults living with an unmarried partner has nearly doubled, rising from 4.1 percent in 2001 to 8 percent in 2021, according to Census data. And as more people choose to cohabitate before tying the knot, some are also weighing up another major decision: whether or not to buy a house together before marriage.

On the plus side, couples who purchase a house before getting married can start building equity sooner than if they waited until after the wedding. However, those who hold off will have more time to save for a down payment and receive more tax benefits than unmarried partners. Let’s dive into the pros and cons of each scenario.

Buying a house before marriage

Buying a home can be complicated no matter your marital status. But things are particularly tricky when you’re buying with someone you aren’t legally tied to. Before deciding whether to purchase property before or after marriage, consider each of these factors.

Mortgage needs

Your marital status does not affect whether or not you’ll qualify for a mortgage, so it doesn’t matter if you apply as a married couple or as separate individuals.

When you apply for a mortgage with another person, the lender will evaluate each person’s financial profile separately, including credit history and income. They’ll generally use the lower of the two credit scores to make a lending decision and determine the terms of your loan — which is fine if you are in similar financial circumstances.

“It may be wise for a couple to apply together if they have comparable credit scores and debt loads,” says Nick Good, a real estate broker with EXP Realty’s Good Home Team in McKinney, Texas. “In this instance, listing two incomes on the application will raise the likelihood that it will be accepted.”

However, if one of you has a subpar credit history, it could decrease your chances of getting approved. You could also get stuck with a higher interest rate or down payment. In this case, it might make more sense to have the person with the better credit apply for the mortgage alone.

Method of ownership

Even if one partner isn’t included on the mortgage, they can still have an ownership stake in the home — as long as they’re on the deed. “Legally, the mortgage holder does not control who owns the house,” explains Good. “Instead, it depends on who is listed on the deed, which transfers and documents ownership of the house.”

There are several ways to divide ownership and define who holds a home’s title when you’re purchasing property with someone else. Some popular options include:

• Joint tenancy: Both parties receive equal, 50/50 ownership rights. Some joint tenancies come with “rights of survivorship,” meaning that if one dies, the other assumes full ownership of the home.
• Tenancy in common: Each party receives a percentage of the property, which can be equal or unequal. Automatic right of survivorship is not granted, meaning one person’s percentage of ownership can be passed down to an heir upon their death. This can be useful for people with children from a previous relationship, for example, who may want to leave their portion of the property to their kids.
• Tenancy by entirety: In some states, married spouses or domestic partners can hold title as tenants by entirety, which gives each person full ownership (rather than being split 50/50). This prevents one of the partners from selling the property without approval from the other, and also provides protection against creditors.

Tax implications

When tax time rolls around, many homeowners can take advantage of the mortgage interest tax deduction to reduce their tax liability.

This is especially valuable for married homeowners. If you’re married and filing jointly, you can deduct the interest paid on the first $750,000 of your mortgage. If you’re married but filing separately, the limit is $375,000 each.

The situation is not as favorable for unmarried couples who own a home together. Although singles can still deduct up to $750,000 in mortgage interest, only one homeowner can claim the deduction — meaning that one of you will miss out on the savings.

Benefits of waiting until you’re married

If you’re planning on getting married relatively soon, there are several reasons why it may make sense to hold off on your home purchase until after the wedding. From a purely financial point of view, waiting to buy until you’re married gives you more time to save for a down payment and get a solid grip on your joint finances.

“Waiting can be a beneficial moment to observe your partner’s financial habits, including spending and saving, and prevent potential financial strain from hurting the relationship,” says Jeffrey Zhou, co-founder and CEO at Fig Loans.

On top of that, buying as a married couple offers more tax benefits and makes filing easier. Plus, depending on your state and title, you may have more legal protection as a married person in case of a divorce.

Finally, purchasing a home is often a decades-long financial commitment. If you buy with your legal spouse, you’ll (hopefully) feel confident that you’re taking this significant step with someone that you expect to spend the rest of your life with. And one spouse having sole ownership of the marital home can become awkward once you’re both living there together.

Bottom line

Even in the simplest of circumstances, buying a home can be overwhelming. It’s even more so if you’re planning a wedding on top of it. Whether you choose to buy now or wait, make sure that you plan your purchase carefully and get expert financial advice if needed. Weigh the pros and cons of each to be sure that you’re making the right financial decision for your (and your partner’s) future.