Blog posted On September 18, 2018
Millennials may be delaying marriage but not homeownership, according to a recent study. In 1985, 75% of first-time home buyers were married couples. Today, married couples make up 57% of first-time home buyers. The National Association of Realtors’ managing director of survey research commented, “it’s absolutely a trend. People feel fine purchasing a home without a ring.”
In 2017, unmarried couples comprised 16% of first-time home buyers, compared to 12% in 2012. Single men and women accounted for 25% of first-time home buyers. With home prices and interest rates expected to continue rising, Millennials aren’t waiting for marriage to make real estate moves. NAR reports the median price an unmarried couple pays for their first house is $177,000, the median price a single woman pays for her first house is $154,000, and the median price a single man pays for his first house is $145,000.
When married couples purchase a home together they typically take the title “tenants by the entirety,” meaning each spouse owns 100% of the home. If one spouse dies, the surviving spouse will immediately own the dead spouse’s interest. In the case of divorce, the home will either need to be sold or the mortgage will be refinanced by the spouse who will continue to occupy the home. Unmarried couples have three options when choosing the title on their home: sole ownership, joint tenancy, and tenants in common.
With sole ownership, only one name is recorded on the deed, and that person is legally responsible for the property. Sole ownership may be the best option if one of the partners has significantly better credit and is able to get approved for a mortgage on their own. The disadvantage of sole ownership is that if the relationship ends, only one partner has legal rights to the property. Also, if both partners were contributing toward the mortgage, only the partner on the title has legal access to the home equity.
Another option is joint tenancy, each person owns 50% of the property and has the “right of survivorship.” If one partner dies, the other partner will automatically inherit their share of ownership. In the case of a break up, one partner will have to buy the other partner out of their share if someone chooses to stay in the home.
The third option is tenants in common, where the partners own unequal shares of the home. For example, if one partner contributed more toward the down payment, ownership could be split 75% / 25%. However, with tenants in common, if one partner dies the share of the property will not be automatically transferred, unless written in a will or living trust.
Buying a home is traditionally the first significant investment an American consumer will make. Homeownership is one of the first steps toward building wealth and home equity in America continues to reach record highs. If an unmarried couple or single person is creditworthy and able to afford a mortgage payment, waiting until marriage to buy a home is not necessary. If you have any questions about buying a home as an unmarried couple, consult a local loan officer to review your best options.