How to protect your finances when you cobuy real estate.
Money Girl
305 MG How to Buy a Home With Someone Else, Part One
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I'm Laura Adams, the author of Money Girl Smart Moves to Grow Rich. You can get a copy of the paperback or ebook at your favorite bookseller. I received this question from Kate. My boyfriend and I are professionals in our early 30s and have been talking about buying a house together. Although we probably will get married in a few years, we don't want to wait to buy because housing prices are rising in our area. What are the risks of buying property together before marriage? No matter if you're thinking about buying real estate with a romantic partner, friend, or business associate, there are important financial, legal, and emotional issues to consider. In this two-part series, I'll give you advice to stay safe. An increasing number of home buyers are teaming up to buy real estate. Maybe you're like Kate, who's toying with the idea of committing to a house before marriage, or perhaps you're thinking about making a real estate investment with a friend, relative, or coworker. There certainly are advantages to pooling funds and buying a home or investment property that you might not be able to afford on your own. However, buying real estate with someone else can easily damage your finances and your relationship if you're not careful. Unmarried couples don't have as many legal rights as married couples, so it's very important to consider all the potential pitfalls of buying property with a boyfriend or girlfriend. When you buy a home, you receive a document called a deed, which shows the names of the owners and how you legally own the property. This is one of the first decisions you'll need to make. If you're not married, you have two main ownership options. The first is called Tenants in Common. This is when each person owns a distinct share of the same property, which can be in any proportion, such as 50/50 or 75/25. When one tenant in Common dies, shares go to his or her beneficiaries, not to the other owner. This is a common type of title for unmarried co-owners, especially if each contributes different amounts to the purchase. Each owner can sell or give away his or her interest in the property. The second way to own property with someone else is called joint tenants with right of survivorship. This is when each person typically has equal interest in the property and maintains the right of survivorship. That means when one owner dies, their interest automatically passes to the surviving owner. The deceased owner shares simply disappear and can't be inherited by beneficiaries. This type of title is most common between spouses or family members, when everyone wants the surviving tenant to have full ownership. Although married couples can own property as tenants in Common or joint tenants, they have a better option, which is called tenancy by the entirety. This allows spouses to own property together as a single legal entity. This protects each person because a creditor of one spouse can't attach and sell the interest of the property that the other spouse owns. Only creditors of the couple can touch property owned as tenancy by the entirety. And when one spouse dies, their interest passes to the surviving spouse, just like with joint tenant ownership. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. 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Contact us before canceling entire accounts and continue bill credits or credit stop and balance on a required finance agreement to bill credits and if you pay off devices early, ctmobile.com. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then Ixcel is a right for your family. Ixcel is an online learning program for kids covering math, language arts, science and social studies. Ixcel has interactive practice problems for topics from pre-k to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards and explanations for wrong answers. Ixcel figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems and learning games too. One subscription to Ixcel gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder Ixcel is used in 95 of the top 100 school districts. I think the positive feedback that Ixcel gives is really crucial when it comes to learning. So make an impact on your child's learning. Get Ixcel now and money girl listeners can get an exclusive 20% off Ixcel membership when they sign up today at Ixcel.com/moneygirl. Visit Ixcel.com/moneygirl to get the most effective learning program out there at the best price. Once you've thought about whether you want your interest in a property to pass to the other owner or to your heirs, you'll need to decide how to finance it. Do you each have equal amounts of money to contribute to the down payment? Do you each want to be on the hook for a mortgage? You won't be treated any differently when buying real estate with a partner or friend than with a spouse. However, today's lending environment is tough. Each mortgage applicant will need to show ample income, job history and credit scores in order to be approved. If one person has low income or poor credit, you could leave them off the mortgage, but that could cause problems down the road. It's crucial to remember that you're not legally responsible for the debt unless your name is on the mortgage. Being named on the deed indicates ownership, but not financial responsibility for debt on the property. Let's say your unemployed partner expects to find work after you move into your new home, but can't. If you're the only one named on the mortgage and you don't make 100% of the payment each month, your credit will be destroyed and you'll probably face foreclosure. In the excitement of buying a home, don't forget that you're making a huge investment. A estate could jeopardize your entire financial future. To avoid confusion or any future misunderstandings about your arrangement with a co-buyer, you should create a formal ownership agreement. Don't assume that you'll just talk through any future disagreements when the time comes because your relationship could be very different then. Drafting and signing a document that outlines every potential issue you can think of is the only wise way to proceed. In part two of this series, we'll cover every major issue that an ownership agreement should include when you decide to buy a home with someone else. To read a transcript of this show, connect with me on Facebook or Twitter or sign up for the free Money Girl newsletter. Visit the Money Girl page at quickanddirtytips.com. This is episode number 305, called "How to Buy a Home with Someone Else Part 1." I'm glad you're listening to Ching. That's all for now. Courtesy of Money Girl, your guide to our richer life. [MUSIC] H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. 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