At a time when many of their peers are still renting or living with mom and dad, Stephanie Siewert, 22, and her boyfriend of six years moved into their first purchased three-story townhouse last month in Southern California. Family members wondered why the couple didn't rent together or get married first, but the two were adamant about building equity and getting a low interest rate while they could. For about three years (including part of college), they each lived with their parents to save money for the down payment. "We'll eventually get married," Siewert says. "It's just a big expense, and we didn't want to waste money on rent."
Alida Almonte, 31, and her boyfriend feel similarly, so they bought a three-bedroom colonial together last August on Long Island, N.Y. "Interest rates were going up, and we would rather have spent our savings on a down payment on a home than a wedding," she says. "A wedding is great, and I hope to have one one day, but we have big families and weddings are so expensive here."
As young people delay marriage, often in pursuit of careers or advanced degrees, a study released by Coldwell Banker Real Estate LLC last April found that a quarter of married couples between ages 18 and 34 bought their first home together before walking down the aisle.
This pattern isn't limited to Generation Y. The study found that 14 percent of those over age 45 have also bought homes with a significant other before marriage. "In the older market, you're seeing people who don't want to get remarried after their husband or wife passed, and they're holding onto their spouse's Social Security benefits," says Brad Brauer, an associate broker with HomeSmart Elite Group in Phoenix. "Then there's the gay community that cannot legally marry in some states."
Now that living together before marriage has lost its stigma in many circles, Sheryl Garrett, founder of the fee-only financial advisor locator Garrett Planning Network and co-author of "Money Without Matrimony: The Unmarried Couple's Guide to Financial Security," says it can help unmarried couples learn to collaborate and cooperate. Still, she encourages unmarried couples who are living or buying property together to create a domestic partnership agreement or a living together agreement. The document should outline who is responsible for which expenses and what happens if one person needs to move out.
Some couples might sell the property and split the proceeds following a breakup. "If you bought it together, the quickest solution is to leave it together," Garrett says. Sometimes that's not possible, though, in which case one party might stay in the residence and buy the other person out, assuming he or she has the money. When relationships fizzle and two people don't share expectations about how to handle the property, it can get messy and there often isn't a clear path to resolution. "Divorce is a legal mechanism for dividing financial assets," Garrett says. "Without a legal marriage, we don't have a divorce [process]. When there is a separation, we often see that the more assertive party bulldozes the other party."
Cristin Z., who requested not to use her full name, learned this the hard way after she and her then fiancé bought a condo together in San Francisco several years ago. Forty days before the wedding, they called things off. They hadn't planned for the dissolution, and they didn't document how much each had spent on household expenses. The pair would have lost money if they sold the property, so she offered to keep the ring and let him keep the condo. He refused and tried to sue her, she says.
"We went back and forth with lawyers for like eight months and then finally we decided on the original agreement," Cristin says. Interest rates had decreased, so he refinanced at a lower rate and removed her from the mortgage, after which she quitclaimed (renounced her ownership of) the property to him. Cristin is engaged again, but says she's learned to be more cautious and look out for her interests. "I think it's important for people to remember the unromantic part of romance," and put things in writing, she says.
Unmarried couples should consider not only what might happen in case of a breakup but also if one partner dies. Spouses can generally inherit real estate and other assets without incurring estate taxes, but unmarried partners may run into tax issues if one partner passes away or relinquishes his or her share of equity (potentially creating a taxable gift) in a breakup. And without estate planning documents, family members of the deceased may feel entitled to a share of the property if the couple isn't legally married. When in doubt, consult an attorney to ensure you have the appropriate documents in place.
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