Buying a Home as an Unmarried LGBTQ+ Couple. LGBTQ+ Real Estate Alliance.

The Challenges of Buying Real Estate Together

According to a 2021 report on generational trends in home buying by the National Association of Realtors® research group, 9% of all recent homebuyers are unmarried couples.

Society in general has become more comfortable with the idea of living together before marriage, and until recently marriage was not an option for most LGBTQ+ couples, with the first legal same-sex marriage happening in 2004 in San Francisco. In 2015, the Obergefell v. Hodges decision by the Supreme Court made same-sex marriage legal nationwide.

Today, many couples see living together, and even joint home ownership, as steps toward deepening their relationship emotionally and financially. So, whether couples see marriage as the culmination of their relationship or not, home ownership remains an option for all.

Applying for the Mortgage

While some lenders will allow unmarried partners (whether straight or LGBTQ+) to apply for a mortgage together, most often the partner in the best financial position should seek out the mortgage.

The partner with the best credit score, debt-to-income ratio, employment status, and overall assets will be sure to get the better mortgage rates and terms. The title can still be held by both partners (see the next section), but when applying for the mortgage, your goal is to get the best deal possible.

The downside to applying together as an unmarried couple is that the lender may base their decisions on the financials of the partner with the weaker economic situation.

The good news is that the partner who does apply for the mortgage can’t be discriminated against because they are unmarried. The Equal Credit Opportunity Act prevents financial institutions and other firms from discriminating against customers based on sex or marital status.

Holding Title for the Property

The title for your new home is proof of ownership. Regardless of which partner secured the mortgage or if it was done jointly, you have several choices when it comes to how you will hold the property title as a couple. Always remember, the deed records ownership, not the mortgage.

  • Equal shares or Joint Tenancy. For a committed couple, the advantage here is that joint tenancy creates a right of survivorship. If one partner dies, the deceased’s share goes to the surviving partner.
  • Tenants in common. Under this legal arrangement, each partner owns an undivided interest in the estate. This can protect each individual’s investment in the property but does not offer the benefits of survivorship. If one partner dies, the deceased’s interest goes to their heirs.
  • Sole ownership. The couple may agree that the partner who applied for the mortgage also maintains sole ownership rights in the estate. The other partner has no interest in the property (unless the couple subsequently marries.)
  • Living Trust. The revocable living trust is a flexible and affordable option for property owners.” All trust assets are held in the trust until the trustor dies or is incapacitated and all trust assets are distributed according to the terms of your estate plan. The revocable living trust process takes less time and money than other options, with no need for probate.

Beyond choosing the basic approach for the title, an unmarried couple should consult a real estate attorney or tax advisor about their decision. Each option has specific consequences when it comes to taxes and how things will proceed when it comes time to sell the home.

Tax and Legal Issues

When it comes to home ownership, married couples have a tax advantage over the unmarried. The legal issues involved in unmarried joint ownership can be complex, which is why consulting a tax advisor is a good investment.

  • The IRS only permits one homeowner to claim the deduction on mortgage interest.
  • Married couples filing separately may be able to have one spouse add the mortgage interest to their deductions, gaining a benefit over the standard deduction.
  • When selling the home, only one homeowner in an unmarried couple is able to claim the capital gains deduction.
  • The cost of home ownership is more than the purchase price. Unmarried couples should have a plan for handling ongoing costs, like insurance, taxes, maintenance, and upkeep.

Consulting with a lawyer and having a formal agreement in place that protects both of your interests is another wise investment.

What if One Person Moves Out, or Dies?

Unmarried LGBTQ+ couples have many reasons to buy a home together. Compared to apartment living, owning a home is an investment in the future, and a possible step toward a more committed relationship and marriage. Owning a home is simply easier with two incomes to support the move. The desire for greater living space and the flexibility to truly make that space your own make home ownership attractive.

But what happens if one person moves out, or passes away?

This is another area where pre-planning is essential. In most situations, any partner owning a portion of the property can force a sale to gain their percentage of the ownership. The other partner may have to refinance to make this possible.

If one partner cannot buy out the other, the solution is to sell the home. In some circumstances, the bank or lending institution may force the sale.

When buying a home with a partner, you both should bear in mind the possibility that one of you may pass away. Having an estate plan in place can help a couple navigate these difficult situations. For example, if one partner passes away, will their share of the property have to be distributed among family members? Are there other financial issues that will need to be addressed? Estate planning, along with choosing the right Title situation, can help solve these problems by specifying what will happen with your property after death.

Homebuyer Guide

Even if this is your second home buying experience, you’ll find solid information in our “First Time Homebuyer Guide.” This 40+ page guide delivers a range of critical information from Understanding the Mortgage Process and Types of Loans to Avoiding Discrimination and which states have no LGBTDQ+ Housing Protections.

Find the Help You Need

The LGBTQ+ Real Estate Alliance, a 501(c)6 organization, was launched in June 2020 by leading members of the real estate industry.  The mission of the Alliance is to Advocate, Elevate, and Celebrate. The Alliance advocates for fair housing for all and promotes LGBTQ+ homeownership.

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