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The Greenhouse
by Pine

What you need to know before buying a home with your partner before marriage

While it may not be the most fun thing to talk about, a cohabitation agreement can protect your interests and offer peace of mind.

It’s a reflection of the times.

When it comes to cohabitation and marriage, well, Bob Dylan said it best—the times, they are a changing! More couples than ever are choosing to buy a home before they tie the knot. According to 2021 national census data, 23% of couples who live together in Canada are unmarried—the highest of any G7 nation. 

This trend isn't surprising, as it's reflective of new societal norms. People are waiting longer to get married, if they choose to do so at all. Plus, we're in some trying economic times, and let's face it: weddings are super expensive. Instead of getting hitched first, couples are opting to buy their homes and build equity instead.  

But, as with most major life decisions, there are a few things you should know before you buy a home with your partner before marriage. Here are the top five considerations to keep in mind to save yourself from any potential headaches (and heartaches) down the line.

1. Know the laws in your province or territory 

You may be thinking, "Buying a home will be fine because we're common-law partners." But just because you're buying a home together doesn't mean you'll be automatically classified as common-law. Each province and territory has their own definition of what is considered common law—so you'll want to know where you and your partner stand and what laws apply to you in your province or territory. 

Under Ontario law, for example, a relationship is considered common-law after a couple has been living together for three years or have a child together and are living together. But, the Family Law Act does not recognize common law relationships when it comes to property divisions, which is why it's so important to get a cohabitation agreement. 

2. Get a cohabitation agreement 

Common law couples sometimes don't have automatic rights to property the same way married couples do, and a cohabitation agreement can protect you and your partner if things go south. The document provides the rights and obligations of each partner and works as added protection for unmarried couples. You can work with a lawyer to make sure yours covers: 

  • The type of ownership on the property deed 
  • The percentage of the home that each person owns 
  • The payment responsibility (and what happens if one party doesn't fulfill their obligation) 
  • The buyout agreement 
  • The dispute process 
  • The exit strategy 

While it may not be the most fun thing to talk about—especially in the early days of searching for a home together—a cohabitation agreement can protect your interests and offer peace of mind. 

3. Decide whether it will be a singular or joint mortgage application 

There are pros and cons to applying for your mortgage on your own or with a partner as co-borrowers. Applying with a co-borrower can help you qualify for much more than you would on your own–more income means you both could potentially afford more–but applying for a mortgage with someone else can also work against you. 

For example, let's say your co-borrower has a bad credit score: if you apply for a mortgage together, your interest rate might be a lot higher than it would be if you were to apply on your own. 

Ideally you need to decide if it makes the most sense to be to have sole ownership (where only one of you is on the title), a joint tenancy (where you get equal rights and shares), or a tenancy in common (where you’re both on the title, but the property doesn’t need to be split equally, but rather it’s split based on what you both contribute).

In a sole ownership situation, you could opt to apply for the mortgage on your own–if you think you’ll have a better approval rating–and have your partner pay you half of the mortgage payments without actually being on the mortgage. That means the person on the mortgage will get all of the liability, and the person on the title has rights but without any liability. If you think there’s a chance that only one of you will be on the mortgage, speak with a lawyer first to make sure you’re both covered. 

4. Discuss how you plan to financially pay for the mortgage

After discussing how you want to own the property, before even finding your dream home together, as mentioned in the cohabitation agreement, it’s important to discuss the financial obligations that come along with a mortgage. 

You should discuss how you want to split the bills, including mortgage payments, groceries, taxes, and other expenses. Are you both more in favour of a 50/50 split or would you rather have one person handle the mortgage while the other takes care of the bills?

If one of you makes more money than the other, it might also be an important discussion to determine how much you both can contribute.

The important thing is to have an open discussion early on, so you're both on the same page when it comes to finances. Trust me, it'll save you a lot of headaches down the line when bills start rolling in.

5. Have a plan in case you break-up 

We hate to bring the bad vibes, but people can and do break-up. It's not the sexiest conversation to have, but you'll want to talk to your partner and figure out what you would do if, for whatever reason, you both choose to go your separate ways. 

For example, if one person makes more than the other, they may want to buy the other person out. Or, you could have a plan in place to sell the home and split the profits. A break-up plan (or exit strategy) can also be outlined in the cohabitation agreement–but if you don't have an agreement, you'll want to have a worst-case scenario plan in place. 

The bottom line 

Buying a home is an exciting time, and splitting the costs of homeownership can make it that much more attainable. But it's the 21st century and not everyone wants to get married. If you're buying a home with a partner before marriage or with no wedding plans in sight, make sure you take the proper precautions to protect yourself—just in case. 

If you and your partner have found a home you love and are ready to apply for a mortgage, apply with Pine. If you have any questions about applying with your partner or co-borrowing, a mortgage agent will be happy to assist you. 

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