The threshold things to decide BEFORE you buy a house together if you aren’t married.
- Who will put in the down payment and closing costs?
- Who is on the loan?
- Each month, how are we paying the mortgage?
- How are we paying for the upkeep on the actual house and property each month?
- How will we hold title with each other?
- What happens if we split up?
Here’s why you need to talk about them.
If the two of you split up and can’t decide how to work out the house issue, then a partition action will be filed. A partition action is the sale of the home. A partition action typically awards a 5% fee of the sales price to the Commissioner under North Carolina law, 6% of the sales price to the realtors, pays off all debts and liens of the parties, and then what is left is split as follows:
- Who paid the down payment and closing costs and has receipts or proof? (Did the other person pay for other things to offset it? They bought the lawnmower, etc.)
- If both of you are on the loan, then you will likely have to refinance it or sell it to resolve it rather than working it out or settling it since the person not residing in the home will not want their credit tied to the remaining person for thirty years.
- It may seem reasonable to have one person pay the mortgage, and one person pay the household expenses. (groceries, electric, etc.) however when it comes time to figure out who gets what out of the house – the court looks at the carrying costs of the house so mortgage payments only. It is safer to have a check or money transfer for one half of the mortgage from each party monthly.
- It may also seem reasonable that a higher earner pays more than the lower earner but understand that if you pay less in the carrying costs, you potentially get less when it sells because you didn’t put in as much.
- If one party has dependents and the other doesn’t, it may factor into how much that party should’ve been paying on carrying costs even if the parties agreed at the time that they would simply split the mortgage costs.
- Who is paying for lawn maintenance or is it being done by a party? If you are paying out of pocket then you might get reimbursed but if you are doing it yourself, it’s unlikely you will get credit. Same goes for upgrades and repairs.
- If you hold title as joint tenants with right of survivorship and one of you dies then it goes to the other party and not to your heirs. If you own it as tenants in common and one of you dies then the heirs of the party who died now own half of the house. This can complicate things greatly especially when the heirs don’t want to pay half the mortgage or want to cash out and sell the house. If both of you aren’t on the deed, you should have a lease agreement between you. The lease agreement provides rights to the person that isn’t on the deed and also gives the person on the deed the right to evict if payments aren’t made. It also fully sets out the expectations of the parties with one another to avoid potential issues down the road.
- If you split up then you either work out buying each other out, have a deed drafted, and move on OR a partition is filed, the house is sold and the proceeds are split.