Mortgages Before Engagement Rings: Is It Smart?

by Kristina on December 19, 2013 · 3 comments

Our lake view ;) @Hailey Kent @Milan Suktankar @Linnea Holmen @Lauren Virginia @Maggie Mcmickle for the lake we build around our homes :) perfectionThis is a contribution by Cait Flanders at RateHub.ca

Whether we like it or not, “traditional” milestones in relationships are far from the norm in today’s society. For most, the days of getting married, then buying a home and then having kids are long gone.

In fact, a report released earlier this year by Coldwell Banker Real Estate LLC revealed that 24% of married couples between the ages of 18 and 34 got a mortgage together before they tied the knot. Compared to 14% of married couples aged 45 or older that bought a home together first, this shows a huge shift in the priorities of today’s young adults.

“While younger generations may be focusing more on their career, and in turn waiting longer to get married and have children, they are not delaying their dream of homeownership,” said Dr. Robi Ludwig, the lifestyle correspondent for Coldwell Banker Real Estate LCC.

The only question now is: are the couples that jump into homeownership first making the right decision? The statistics from that same report will tell you yes. Apparently, 80% of married homeowners said purchasing their home together strengthened their relationship.

“They not only learn about each other’s wishes and dreams during this process, but they also learn how to be practical with each other and compromise.”

That’s all fine and dandy but – and not to kill the mood – it’s extremely important for both buyers to be smart, understand their rights and protect their assets.

For starters, when you start shopping around for your home, look for something below your max budget so you don’t rely on both of your incomes to make your mortgage payment. Why? You probably don’t want to hear this, but there is always a chance you could break-up. (Remember, there’s no ring on it.)

If you did happen to separate, a decision would need to be made about the home: are you going to sell it or can one of you take over the mortgage and keep it? If the mortgage payments were too high, the only possible decision would be to sell. If one of you could keep the home, you could either stay living in it or try to turn it into an investment property.

Now, if you’ve already decided to take the leap into homeownership, make sure your real estate lawyer or notary assigns you both an equal amount of stake in the property; that means both names need to be on the deed and, in Canada, you each need to claim 50% of the title. Again, not to burst the love bubble, but this will ensure you both get what you deserve should you ever split and have to sell.

Finally – and this one’s important – it’s probably best not to combine your finances. Sure, you can get a joint account for your mortgage payment to come out of, but keep the rest of your money (including credit cards) in separate pockets. Separate accounts keeps each of your credit scores in your own hands only, and gives you access to your own assets should you ever suddenly split.

In the end, only you and your partner can know when purchasing a home together is the right decision. Above all else, make sure you’re both comfortable having the tough conversations that need to happen when it comes to money and love. If you’re both working towards the same goals, and can make mature decisions about the serious stuff, by all means dive in holding hands.

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