Buying a home with someone who is not your spouse can get a little complicated. There are some important considerations before, during, and after the home buying process. The following tips for unmarried homebuyers in MA may help.
In the deed that grants you ownership of the property, you have the option to own as joint tenants or tenants in common. The difference in these terms has to do with who inherits the percentage ownership in the property when one of the owners dies. As joint tenants, when one person dies, his/her ownership percentage goes to the remaining owners of the property. As tenants in common, if one person dies, their ownership percentage goes to their estate/heirs. This is an extremely important and personal decision. Whatever option is selected applies to all co-owners.
In co-ownership situations, it is best if all parties contribute equally since all parties will own the property equally. For example, if you and a friend are buying a home together, it would be best if you both contribute the same amount to the closing costs and down payment. If one person covers 100% of the down payment, that could lead to resentment down the road since both of you would still own 50% of the home. If there is an agreement for the non-paying buyer to slowly pay back the other, then it would be best to contact an attorney for guidance.
Home Ownership Expenses
In addition to the up-front home buying costs, be sure to also discuss ongoing home-related expenses. This includes the mortgage principal and interest, homeowners insurance, property taxes, utilities, and home repair/maintenance costs. Mortgage expenses remain constant but the other ones could change from month-to-month and/or increase over time. Make sure everyone involved understands the financial obligations of buying and owning a home and, more importantly, has the financial ability to manage it.
Tax Benefits and Accounting
There are several tax benefits to owning a home. This includes deducting mortgage interest, taxes, and some closing costs on annual tax returns. It is important to know that all owners cannot claim the full amount of tax benefits on each one’s tax return. The amounts should represent the percentage of ownership. For example, if there are two owners, then each should claim 50% of mortgage interest, taxes, etc. Communicate with your co-owners on the amounts you are each claiming to avoid committing tax fraud.
More Tips for Unmarried Homebuyers in MA
When entering into any investment opportunity, it is critical to communicate openly with everyone involved. Discuss anything and everything to ensure that you’re on the same page. Most importantly, keep good records. From the closing to monthly payments, make sure it’s clear how much each co-owner has contributed, claimed on taxes, etc. Transparency will go along way in maintaining good relations with your co-owners.
Every home purchase is unique and can be somewhat complicated. This is particularly true with unmarried homebuyers. Be sure to consult with an attorney for assistance with special arrangements/agreements that you may need to make as co-owners of a property in Massachusetts. Contact us for a free consultation.