There are other things to arrange for in addition to the wedding if you are thinking about purchasing a property before getting married. Your marital status can play a role in determining whether you buy the home on your own or with other people as co-owners, as well as how you choose to hold title to the property. Continue reading to discover more about the advantages and disadvantages of applying for a single mortgage vs a combined mortgage, as well as the most typical types of title ownership that joint property buyers undertake.
Regardless of your marital status, purchasing a property can be difficult. However, things become especially complicated when you purchase from someone you are not legally bound. Consider each of these variables before determining whether to buy a home before or after marriage.
Mortgage requirements
Your marital status does not affect whether or not you’ll qualify for a mortgage, so it doesn’t matter if you apply as a married couple or as separate individuals.
When you apply for a mortgage with another person, the lender will evaluate each person’s financial profile separately, including credit history and income. They’ll generally use the lower of the two credit scores to make a lending decision and determine the terms of your loan — which is fine if you are in similar financial circumstances.
“It may be wise for a couple to apply together if they have comparable credit scores and debt loads,” says Nick Good, a real estate broker with EXP Realty’s Good Home Team in McKinney, Texas. “In this instance, listing two incomes on the application will raise the likelihood that it will be accepted.”
However, if one of you has a subpar credit history, it could decrease your chances of getting approved. You could also get stuck with a higher interest rate or down payment. In this case, it might make more sense to have the person with the better credit apply for the mortgage alone.
How the property is owned
Although if one partner isn’t on the contract, they might still have a share in the home as long as their name is on the deed. “Legally, the mortgage holder has no control over who owns the house,” Good explains. “Rather, it is determined by who is named on the title, which transfers and verifies ownership of the home.”
When acquiring property with someone else, there are numerous ways to share ownership and designate who has the title.
Taxes
When tax season arrives, many homeowners can use the monthly mortgage tax deduction to minimize their tax bills. This is particularly useful for married homeowners. If you’re married and filing jointly, you can reduce the first $750,000 of your mortgage interest. The limit for married couples filing separately is $375,000 each.
Unmarried couples that own property together face a more difficult scenario. Although individuals can still deduct up to $750,000 in loan interest, the deduction is only available to one homeowner, so one of you will miss out on the savings.
The Advantages of Waiting Until You’re Married
If you’re getting married soon, there are various reasons why you might want to postpone your property purchase until after your wedding. Waiting until you’re married to buy provides you more flexibility to prepare a deposit and establish a firm grasp on your shared assets.
“Waiting can be an advantageous time to monitor your partner’s personal finances, including saving and spending, and prevent possible financial strain from harming the relationship,” says Jeffrey Zhou, co-founder, and CEO of Fig Loans.
Furthermore, purchasing as a husband and wife provides extra tax benefits and simplifies reporting. Furthermore, based on your state or title, you may have greater legal rights as a married person in the event of divorce.
Lastly, buying a home is frequently a long-term financial commitment. When you purchase with your legal spouse, you’ll (ideally) feel confident that you’re making this important decision with someone you are going to spend the entirety of your life with. And having one spouse own the marital house solely can be problematic after you’re both living there.
