Buying a house with your boyfriend is a big mistake ... Especially when he dumps you
It's a really bad idea to buy a house with your boyfriend or girlfriend.
Even if you've talked about exactly what color ribbon you'll tie around your wedding favors, taking the housing leap before you say "I do" can be a disaster if one person decides to end the relationship first.
Learn from reader Alana. (No, not her real name.)
In June, the New Jersey resident bought a home with her Wisconsin-based boyfriend — in Wisconsin.
They'd been dating for years. She'd planned her move to the Midwest. He'd already let slip when he was going to propose.
With mortgage rates and housing prices so low, why wait to get married to buy a house?
She put nearly $10,000 of her savings into the down payment.
Two weeks after they closed on the house, he dumped her.
That ended their romantic relationship real fast.
Unfortunately, there's no quick fix to get her out of the financial end of the relationship.
"The only way that the reader will be released from her liability to the bank is for the loan secured by the property to be refinanced in the ex-boyfriend’s name alone,” says Reggie Wegner, an attorney at Lichtsinn & Haensel, a Milwaukee-based law firm.
The bank gave the couple the mortgage, not one person or the other. You can't just wipe a name off a mortgage to absolve one person of the financial responsibility.
If you could do that, everyone would be recruiting friends with great credit scores or better-paying jobs to help them qualify for lower interest rates and bigger loans, then knocking their names off the mortgage.
The ex-boyfriend suggested she sign a quit claim, something that both Wegner and Liz Weston, a personal finance columnist for MSN Money, strongly advise against her doing.
It would take her name off the deed but not absolve her of the mortgage.
"That's giving up the asset while still being responsible for the debt,” Weston says. “In fact, nobody should sign a quit claim without consulting a lawyer, because there are all kinds of tax and legal ramifications to such a transfer.”
The boyfriend says he will be able to refinance the loan in early 2013.
If he can’t do that, Alana may have to try and force him to sell the house.
Fortunately for her, she's not sinking more money into the property.
The ex-boyfriend's paying the entire mortgage with the help of a friend who moved in and is paying rent.
Still, it's in her best interest to get off the mortgage ASAP. Not only will she get her portion of the down payment back, she'll also protect her credit.
"As long as she's on the mortgage, her credit's at stake. A single missed payment can knock up to 110 points off her scores," says Weston. "So she has a strong incentive to either sell the place or have him refinance in his name only."
Wegner says she should hire a Wisconsin-based attorney to represent her interests when the home is refinanced or sold.
Professional help will be especially important if things don't proceed amicably, which they often don’t when we mix money and emotions.
Even if they still stayed best friends, hiring legal counsel would "ensure that reader receives her fair share in exchange for the surrender of her interest in the home and is in fact fully released from liability associated with the home," says Wegner.
Alana wrote in to ask us about what to do not only for her sake but for the sake of other readers.
She wants you to avoid the nightmare she’s going through as she not only tries to heal her heart but get her money back from the person who broke it and is still living in a house she partially owns.
If you've read this and are still thinking of buying a property with someone who is not your spouse — whether it's your soon-to-be spouse, your brother or your college roommate — Wegner suggests going through the extra step of signing a Tenants in Common Agreement.
This "will set forth the individuals' respective rights and responsibilities in connection with the ownership and maintenance of the property," he says. "A Tenants in Common Agreement will also typically set forth the options and procedures for an individual to sell their interest in the property."
It's signed at closing, and typically each person will hire his or her own attorney to execute the agreement.