Author Topic: Buying a house together before Marriage?  (Read 14687 times)

Megatron

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Buying a house together before Marriage?
« on: May 15, 2013, 03:28:43 PM »
I've been lurking around the community for a few months now and has been adapting some of the mustachian ways ever since the first article I read. I wanted to check with you guys to see what advice you have for me.

situation: my girlfriend of 2 years have been living for free including utilities in her grandparents estate and finally her family has sold the property and closing at the end of the month. So she and I (mostly she because of her "eviction") wants to get a place together. I'm currently living in a bachelor pad/condo where rent is $500 + 50 utilities. She (a veterinarian) has a dog and cat so we need a place with a yard. Rent is extremely cheap for me because a friend of mine owns the place (3 bedroom /2 baths) but is a consultant so he's out of the country 90% of the time. I've basically been house sitting for him for the last 3 years.

We've been pre-approved for a 350k home but don't have the liquid cash for all 20% of the downpayment but my girlfriend said we can borrow from her family trust for the down payment. (her grandparents had money and established a perpetual? trust, it would be a gift but we would basically have to pay it back with little or no interest). mortgage rates are real low now (one of the main reasons I also want to buy now vs rent) and we are looking at 2 story buildings that are in the 300ks. Living on one one floor and renting out the other.
Another thing is, we are not married but we plan on getting married within next year or so. (we are 100% sure about this last part, I already have to ring, just haven't propose yet)

so, am I making a mistake? or should I try to convince her rent an apartment for a bit? or live in the bachelor pad. not very dog / cat friendly. typical rent is about $800-$1200 for an okay 1 bedroom place in chicago. her family is very nice to me but I don't know if it's a pride thing or the way that I was raised that I don't want to borrow from her family trust because I think we should do it on our own. Should I take out the money from my 401k  / Roth IRAs?
« Last Edit: May 16, 2013, 08:06:17 AM by MegatronWasHere »

kudy

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Re: Buying a house together before Marriage?
« Reply #1 on: May 15, 2013, 03:31:57 PM »
I did it - it didn't work out. She broke up with me and moved out. I made the house work, and eventually got it refinanced with a title change to remove her from the paperwork. Thankfully she was cooperative (and available) to do the refinance a few years later with no fan-fare.

It's not a horrible idea for everyone, but I say proceed with caution - especially if you couldn't afford the mortgage on your own. Also, draft a partnership agreement for the purchase in case something should happen to one of you (or one of you wants out).

Spork

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Re: Buying a house together before Marriage?
« Reply #2 on: May 15, 2013, 03:34:59 PM »
Don't quote me on this... If you're trying to escape PMI with the 20% down, I vaguely remember that the 20% cannot be borrowed.  It's either got to be yours or a gift.  [Again... I can't say I'm 100% sure on this, but check it out to be sure.]

As kudy says: proceed carefully.  Marriage provides you both with some free(?) legal protections.  If you're not married, you'll need to provide those on your own -- for the safety of each of you.

Dee18

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Re: Buying a house together before Marriage?
« Reply #3 on: May 15, 2013, 03:53:11 PM »
Sounds like you have great instincts!  Yes, do it on your own.  Maybe the first issue you should decide is whether you want to live with your girlfriend or not.  If you definitely do, then I would suggest you two together find the least expensive place you can live in while you save for the down payment. Otherwise, continue living separately while you save for that down payment. 

Sounds like you have a nice situation now.  Are you really eager for the extra work of home ownership right now? 

ScubaAZ

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Re: Buying a house together before Marriage?
« Reply #4 on: May 15, 2013, 03:54:42 PM »
I would never buy house with someone I wasn't married to (as a place to live, I suppose investors may do that more frequently through certain business entities).  I especially would not do it if I couldn't afford it on my own.  FWIW, I just bought my house and my boyfriend lives with me but he is not on the title or the mortgage, and I don't need his income to pay the mortgage.  That can always be done later if we get married (or not), but those are some big legal and financial ties to someone who may or may not be around for the long haul (I suppose not that marriage guarantees that either... but at least the divorce process is designed to deal with this issue, rather than just a breakup where no rules of engagement exist but both of you could ruin the other's credit/finances pretty darn quick.)

SunshineGirl

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Re: Buying a house together before Marriage?
« Reply #5 on: May 15, 2013, 04:20:01 PM »
My instinct says hold off on buying.

Tami1982

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Re: Buying a house together before Marriage?
« Reply #6 on: May 15, 2013, 05:30:10 PM »
Don't quote me on this... If you're trying to escape PMI with the 20% down, I vaguely remember that the 20% cannot be borrowed.  It's either got to be yours or a gift.  [Again... I can't say I'm 100% sure on this, but check it out to be sure.]

As kudy says: proceed carefully.  Marriage provides you both with some free(?) legal protections.  If you're not married, you'll need to provide those on your own -- for the safety of each of you.

You are correct!  The money has to be sourced, and "seasoned."  The bank has to be able to determine where it came from and it has to be in your account for 90 (I believe) days.

StarryC

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Re: Buying a house together before Marriage?
« Reply #7 on: May 15, 2013, 05:40:25 PM »
I would advise against this for relationship/personal reasons rather than financial ones. 

It is generally a bad idea to "slide" into living together/marriage.  If there were no other housing issues, and she and you could both stay at your current homes indefinitely would you feel like now was the right time to make the relationship move of moving in together?  If so, then you should do something.  If not, you shouldn't move in together. 

If you feel like you are ready to commit the next 30 years to sharing finances with someone via a mortgage, and feel confident enough to borrow money from that person's parents, there is no reason to wait to get married.  Whatever is preventing you from getting married soon, should probably also prevent you from intwining your homes, finances, and families.  (Assuming of course that marriage for you is allowed and something you aren't ideologically opposed to.) 

Also, if her grandparents have an "estate" and a "family trust" I'm kind of confused about why the down payment would be a loan instead of a gift?  I guess that's up to them, but I would want to learn more about the relationships before taking a loan or a gift from someone else's family. 

Snow White

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Re: Buying a house together before Marriage?
« Reply #8 on: May 15, 2013, 05:41:49 PM »
I bought a house many years ago with a man I was sure I wanted to marry.  Absolutely sure.  Until I wasn't.   It was a financial nightmare to unload the house during a housing downturn (of course) and at first I lived in it but then I took a job out of state and he moved back in while we were trying to sell.  It was a long costly process that would have been much easier had only one of us purchased the house.  He was too angry and hurt with me to want to cooperate so everything was harder than it should have been.  End of story, everything worked out ok as we each married someone else and stayed happily married but you can bet that I would NEVER buy a house with a lover, friend, partner, sister, brother...anyone but a spouse, again!

nktokyo

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Re: Buying a house together before Marriage?
« Reply #9 on: May 15, 2013, 06:56:07 PM »
Under no circumstances should you do this. None. Ever. God...

tooqk4u22

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Re: Buying a house together before Marriage?
« Reply #10 on: May 15, 2013, 07:28:48 PM »
Under no circumstances should you do this. None. Ever. God...

That's not true....if she is putting up the down payment and therefore taking all the financial risk then I think it is great for him (not for her) - that would be good circumstance IMO.

savingtofreedom

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Re: Buying a house together before Marriage?
« Reply #11 on: May 15, 2013, 08:54:01 PM »
My husband and I did this although our situation was a little different.  We had been dating about 6 years and were renting a place together and had to move out and find something new.  We were at a point of let's get married or not - marriage it was - with  an engagement at around the time we closed and marriage about a year later.

Not sure how old you are but what is driving the 2 year wait to get married - no reason to rush into anything - but that may be worth reflecting on further.

Ironically the people we bought the house from was a couple that had broken up after buying the house but before marriage. 

gooki

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Re: Buying a house together before Marriage?
« Reply #12 on: May 16, 2013, 01:44:03 AM »
My wife and I did this. Bought a house for well before being married. Borrowed money from both families (more from hers) to get over the 20% deposit to avoid all the other fees. We made it a priority to pay back our parents.

I whole hartedly vote do it.

ace1224

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Re: Buying a house together before Marriage?
« Reply #13 on: May 16, 2013, 05:28:34 AM »
i say do it.  i am not married but we bought a house together 5 years ago.  we've been together 10 years this summer, with no plans on getting married anytime soon. 
the only reason i would wait is until you guys have the 20% down instead of borrowing it, borrowing it from family is never fun. 

ScottEric

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Re: Buying a house together before Marriage?
« Reply #14 on: May 16, 2013, 08:13:35 AM »
You have what sounds like a super awesome deal right now, can you possibly stay there and walk the dog somewhere in the neighborhood?  A three bedroom bachelor pad at that rent sounds great for a hunker down and save up 20% down pad.  Especially if it's a one or two year plan to make it to 20%.

What are the terms for borrowing from the trust?

I've seen buying before marriage work really well, and really badly.

As a semi-tangent here is an interesting/fun article about marriage/relationships I read recently:

http://blogs.scientificamerican.com/psysociety/2013/05/10/marriage-tips/

If you don't fit the behaviors described, go ahead and buy the house!

Megatron

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Re: Buying a house together before Marriage?
« Reply #15 on: May 16, 2013, 09:41:27 AM »
Thank you guys for all your advice. I actually have the ring to propose but was waiting for her birthday in a few months to do it.   

Don't quote me on this... If you're trying to escape PMI with the 20% down, I vaguely remember that the 20% cannot be borrowed.  It's either got to be yours or a gift.  [Again... I can't say I'm 100% sure on this, but check it out to be sure.]

Her family would be giving us a "gift", which we would have to pay back with little or no interest (her parents did this where the trust paid for the whole house and her parents are just paying back the trust, we are just borrowing enough for the downpayment. Repayment to the trust will be informal as her dad and uncle owns most of the trust and her aunt is managing it, don't know exact terms right now, girlfriend just told me to not worry about it) I've been somewhat of a Bogelhead (before I came upon this site) by stashing away most of my savings into 401k, IRAs, HSA, stock portfolio and Vanguard mutual funds and index funds. I learn to make my money as hard as possible for me to get a hold of so that I don't make impulse buys, it took a few years after college to learn that (does anyone want to buy some top notch paintballing gears?!! used once a year!). So I have more than enough for a down payment if I do a withdraw or sell some of it. we are "borrowing" from the trust because my girlfriend (not a MMM yet, although she's slowing coming around) can't put up her half of the downpayment (10%). That way we would have equal share of payment. That and my sister and I have also paid off our parents' whole mortgage recently so my cash reserves is down to a few months emergency fund (this emergency fund will be used for my portion of the down payment until I can build it back up again). We are both really old in MMM terms (32) making about the same amount (~170k annual combined income) so paying off the mortgage / family "gift" wouldn't be much of a problem.

Not sure how old you are but what is driving the 2 year wait to get married - no reason to rush into anything - but that may be worth reflecting on further.

I just thought the usual wait for a wedding would be around 1-2 years after engagement so I just threw up that number. I've never propose marriage or made such a big decision before so I thought I better have some cushion time to think/feel things through.

You have what sounds like a super awesome deal right now, can you possibly stay there and walk the dog somewhere in the neighborhood?  A three bedroom bachelor pad at that rent sounds great for a hunker down and save up 20% down pad.  Especially if it's a one or two year plan to make it to 20%.

As a semi-tangent here is an interesting/fun article about marriage/relationships I read recently:

http://blogs.scientificamerican.com/psysociety/2013/05/10/marriage-tips/

If you don't fit the behaviors described, go ahead and buy the house!


We could live in my place, I've talked to my roommate/friend who is currently working in Asia for the next 6 months. He's okay with it even though he's somewhat allergic to cats (so we would have to give up the cat or move out before he gets back from Asia). but the commute (40 minutes) for her work would be friggin horrible (driving traffic during rush hour in Chicago is a nightmare). I take public transportation to work downtown (subways / buses)

thanks for the article. It was a fun read with all the youtube videos. I think in the 2 years together, I can count the number of fights/arguments in one hand and is usually over within a few hours when one person says sorry or we talk through it.
« Last Edit: May 16, 2013, 10:03:33 AM by MegatronWasHere »

TLV

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Re: Buying a house together before Marriage?
« Reply #16 on: May 16, 2013, 10:38:10 AM »
I just thought the usual wait for a wedding would be around 1-2 years after engagement

Depends. If you come from an "abstinence before marriage" religious culture like I do, engagements tend to be much shorter. :)

desrever

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Re: Buying a house together before Marriage?
« Reply #17 on: May 16, 2013, 11:59:47 AM »
I bought a house with a girlfriend once. Only she had the money for a down payment. It was very important for us to structure the deal so that it was fair to both parties.

Here's the deal we struck:
 - We each owned half the house.
 - Detailed spreadsheets of everything were to be kept.
 - If anything bad happened to the relationship, we would sell the house and both move out, settling up the finances.
 - She put 20% (about 70k) down and was responsible for 3/8ths of the mortgage.
 - I put 0% down and was responsible for 5/8ths of the mortgage.
 - All house related and stuff-done-together expenses were split 50/50.
 - As soon as was possible, I would pay her an amount equal to 1/8th the remaining mortgage balance, and the mortgage would convert to 50/50 responsibility.

This worked out great for us. The incentive to square up with her really put our relationship on equal footing, and forced me to get my finances straight. The bookkeeping forced us to pay attention to what we were actually spending. We got married four years later, and it didn't change our finances at all.

MrMoneyPinch

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Re: Buying a house together before Marriage?
« Reply #18 on: May 16, 2013, 12:20:48 PM »
The short answer is NO.
You never lived with her, and that is very different than being together.  Rent something with her, and if in a year or two it still works, marry and/or buy something.
I went from my parents' with that girl, we were very much in love, and... after the first year we were making each other insane.  Considering the costs of buying real estate(10k$ is fast gone: contract, taxes, realtor commission...), very bad idea.

foobar

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Re: Buying a house together before Marriage?
« Reply #19 on: May 16, 2013, 12:54:32 PM »
A couple that lives together with no plans of getting married is in a different spot than a couple planning to get married.  You have no big change. The OP on the other hand is either going to be married in a couple of years or separated.  You have to think of how things will be handled if you break up.   

i say do it.  i am not married but we bought a house together 5 years ago.  we've been together 10 years this summer, with no plans on getting married anytime soon. 
the only reason i would wait is until you guys have the 20% down instead of borrowing it, borrowing it from family is never fun.

crestheaven

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Re: Buying a house together before Marriage?
« Reply #20 on: May 16, 2013, 01:02:50 PM »
Buying a house before marriage, not a good idea, in my opinion, unless you plan to never marry and will split EVERY bill evenly. Sounds like problem solved: proposal. Still woudn't take family money.  Keep life simple. Buy something you can afford on your own.PMI? Does is ever go away? Very mustachian to be independant, not codependant. Less is more anyway if you are mustachian.

limeandpepper

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Re: Buying a house together before Marriage?
« Reply #21 on: May 16, 2013, 03:51:19 PM »
I don't think anyone can say for sure whether this is the best course of action for you. Many people are talking about marriage as if it is the be all and end all, but it's not like divorce doesn't happen. And for those who don't get married, some have very strong relationships, some not so much.

But personally, I would wait - it seems like you two are almost in a hurry to buy only because she's getting evicted, and such a big purchase deserves a more thorough consideration.

foobar

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Re: Buying a house together before Marriage?
« Reply #22 on: May 16, 2013, 07:05:40 PM »
The difference is that in a divorce, there is a well established process for dividing assets. Buying with a random person has a lot more issues.

And I missed it before, remember if you give an engagement ring as a gift (christmas, birthday,...) and the engagement doesn't work out, she is legally allowed to keep the ring. If you give it on another day she is legally required to give it back in most states. Mainly posting just to link to http://sports.nationalpost.com/2013/05/14/money-cant-buy-williams-love-bills-de-sues-ex-fiance-to-return-785000-engagement-ring/



I don't think anyone can say for sure whether this is the best course of action for you. Many people are talking about marriage as if it is the be all and end all, but it's not like divorce doesn't happen. And for those who don't get married, some have very strong relationships, some not so much.

But personally, I would wait - it seems like you two are almost in a hurry to buy only because she's getting evicted, and such a big purchase deserves a more thorough consideration.

BlueMR2

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Re: Buying a house together before Marriage?
« Reply #23 on: May 17, 2013, 06:14:37 AM »
I just thought the usual wait for a wedding would be around 1-2 years after engagement

Depends. If you come from an "abstinence before marriage" religious culture like I do, engagements tend to be much shorter. :)

That's not true.  I come from the abstinence background and 2-3 year engagements are normal...

Also, strongly agree with the person that said do not do this.  It's bad enough buying things with someone that you're married to, doing it before then is a disaster waiting to happen!  Being engaged isn't good enough, people back out of that on a regular basis.  If engaged isn't good enough, then pre-engagement is definitely not!

ScottEric

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Re: Buying a house together before Marriage?
« Reply #24 on: May 17, 2013, 09:42:11 AM »
I'll add this, don't buy a house in a hurry!  There are so many things involved with buying, then there are all the things involved with owning a place. I don't think there's anything wrong with buying with a non-spouse, just as long as you know the risks/benefits.  It sounds like you get along really well.  If you're confident about the relationship and home buying aspect of it and are comfortable borrowing with the terms of borrowing from the trust go for it! 

sdp

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Re: Buying a house together before Marriage?
« Reply #25 on: May 17, 2013, 09:43:44 AM »
Your girlfriend's situation is very close to mine.  My wife and I bought our first house together 3 years before we got married, BUT we lived together for several years before buying the house.  My family trust also helped out with the down payment and while that is a good thing, it is very complicated and I don't think my wife fully understood the implications of that.  "not worrying about the terms" is not necessarily a bad thing, just be careful what she means by that and DEFINITELY get the details, don't just let her family handle the terms.  I didn't worry about the terms either, We set it up as a loan as well for tax reasons and to protect the trust's interest (the rest of my family), if it was a gift from the trust it would be treated as income and taxed as such and it would also be non-redeemable if something bad happened to our relationship- so that might be the reason behind the loan for her, but it was not a loan to produce income for the trust. We view the trust as our inheritance, might as well benefit from our inheritance when I was young and broke rather than wait until I am 70 when my parents die and by then I will be financially independent anyway and won't need any extra money. The terms of my loan were: 0% interest only loan with a balloon payment of the initial principal upon circumstances where neither of us are materially invested in the property, I.E. split up, divorce, my death, or sale of the property.  Remember this was before we got married, so if I died, my wife had 6 months to repay the trust so I took out a term life insurance policy that would cover the repayment if that happened, it was cheap insurance for a healthy 28 year old and I cancelled it as soon as I had enough assets to cover the loan if I died, it probably cost less than 500 bucks for the duration of the insurance.  That way my wife would not be forced to sell the property if I died, I guess she could have refinanced, but then as a single young widow, she would have to make the mortgage payments, AH! things most people dont have to think about when they are in their twenties .  I am sure the trust lawyer can handle the legaleze to protect both Her and your own interests- family trusts are complicated and involve lots of people, not just the two of you, so in essence you would be buying the house with her whole family, are you ready for that?  Then again if you are already thinking about marrying someone with the type of family that is close enough and wealthy enough to have a family  trust managed by a close family member, then my guess is you have a slight understanding of what you are signing up for, not necessarily a bad thing, but a complicated one.  I hope you love her family as much as you love her!

As an aside, My wife and I are very mustachian and even though my family is wealthy, they raised me with mustachian values so that is not necessarily a bad thing. Entitlement to wealth that you did not earn yourself more often than not turns out badly most  of the time, but not always.  The reason my family is very wealthy is BECAUSE we are all mustachian and have been for generations.  So even through the help of the trust, we bought the cheapest house we could find, 700 sq. foot dump on the edge of town even though  we could have bought a house 3 or 4 times as expensive, we sure as hell didn't need to!  We were in our tweinties!  What the hell did we need a nice house for!  Since then we have bought two other houses and rent out our first and second house which we now own free and clear after paying back the trust and accelerated mortgage payments to the bank for 9 years.  If we had bought a bigger house up front, we would probably still own one house.  We would not have the extra equity in the three houses and we would not have the rental income- buying that first house was the first step toward financial independence and quiting our jobs.  I guess you can say it was a test of my wife's ability to adapt to my mustachian philosophies and live very, very well below our means, besides it was so much fun living in that tiny house and remodeling it with my wife in the evenings after work.  By the way she passed that test- she passes all the mustachian tests that life throws at her, one major reason I love her and married her.  On the other hand, my earlier girlfriend that I thought I was gonna marry someday, it would have been a disaster, she is out there somewhere, I bet she is broke, making shitloads of money, living paycheck to paycheck, married to some guy who works 80 hour weeks and I bet she complains about it.....
Cheers,
Scott

TLV

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Re: Buying a house together before Marriage?
« Reply #26 on: May 17, 2013, 09:51:34 AM »
I just thought the usual wait for a wedding would be around 1-2 years after engagement

Depends. If you come from an "abstinence before marriage" religious culture like I do, engagements tend to be much shorter. :)

That's not true.  I come from the abstinence background and 2-3 year engagements are normal...

Also, strongly agree with the person that said do not do this.  It's bad enough buying things with someone that you're married to, doing it before then is a disaster waiting to happen!  Being engaged isn't good enough, people back out of that on a regular basis.  If engaged isn't good enough, then pre-engagement is definitely not!

Interesting. I don't know of a single person I knew as a youth that has had an engagement over a year, and 6 months is about average. I assumed it was because of the abstinence thing, but I guess that's not the only factor.

Wolf_Stache

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Re: Buying a house together before Marriage?
« Reply #27 on: May 17, 2013, 01:06:23 PM »
A bit off topic, but would your answers to this change if the couple was not legally allowed to marry?

My partner and I are talking about buying a house together. We are currently in a domestic partnership. The state I'm in has gay marriage, but it gets so tangled at the federal level (i'm an accountant - I know how messy it can get if you are married at the state level and not the federal level) that I'm not willing to do it at this time.

Spork

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Re: Buying a house together before Marriage?
« Reply #28 on: May 17, 2013, 01:19:45 PM »
A bit off topic, but would your answers to this change if the couple was not legally allowed to marry?

My partner and I are talking about buying a house together. We are currently in a domestic partnership. The state I'm in has gay marriage, but it gets so tangled at the federal level (i'm an accountant - I know how messy it can get if you are married at the state level and not the federal level) that I'm not willing to do it at this time.

My answer was "Marriage provides you both with some free(?) legal protections.  If you're not married, you'll need to provide those on your own -- for the safety of each of you" -- so, no, it wouldn't.  If you're not legally allowed to marry (and my sympathies to you) then all you can do is make a best effort to create the legal wrappers that protect each of you as best as you can. 

foobar

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Re: Buying a house together before Marriage?
« Reply #29 on: May 17, 2013, 09:09:24 PM »
Yes. This would be like a cohabiting couple that doesn't want to get married. They would need to get some legal docs together to handle the stuff normally handled by marriage contract for dealing with separation and death. The OP could do this also but it seems like their relationship has a deadline in a couple of years so why not wait. But then again most people I know are engaged for only like 9-18 months. Most of the ones with longer engagements never get married. YMMV.


A bit off topic, but would your answers to this change if the couple was not legally allowed to marry?

My partner and I are talking about buying a house together. We are currently in a domestic partnership. The state I'm in has gay marriage, but it gets so tangled at the federal level (i'm an accountant - I know how messy it can get if you are married at the state level and not the federal level) that I'm not willing to do it at this time.

lizzigee

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Re: Buying a house together before Marriage?
« Reply #30 on: May 17, 2013, 09:24:47 PM »
I've done it, bought a house with my then partner after we'd lived together a year.  I put up the deposit.  We married two years later and have never had a moments doubt that our purchasing decision was the right one.

As long as you have something legally drawn up before you purchase (not sure what the laws are in the USA compared to NZ) and you are both clear on who is paying what, and how things will be dealt with if you break up, then I can see no reason not to proceed. Whether you are married or not then seem irrelevant.

What I would question is whether you need a 350K house, and also whether now is the right time for you as a couple to purchase a home. I would suggest keeping the marriage bit out of the equation and taking a long hard look at the financial implications of and motivation for any purchase.