When a couple decides that the time is right to begin living together, they may wish to purchase a house jointly. While this is usually a happy time in a relationship, some sensitive issues should be dealt with before making the purchase and obtaining a mortgage. These issues are all related to what will become of the house if the couple splits. It may seem trivial at first, especially if the pair is deeply committed to one another, but by dealing with this potential problem at an early stage, in a precautionary format, much trouble can be avoided if the unthinkable split does occur.
First, come to an agreement concerning whether or not the house will be sold if there is a separation. It is usually financially advantageous for all parties if the house is in fact sold. This way, the only real matter of contention is how the money from the sale will be divided. This is not always as simple as a fifty-fifty split, however. Both parties must come to an agreement of how much they contributed financially to purchasing the house, and the proceeds from sale should be divided to reflect that. For instance, if the total cost of the house was a $10,000 down payment, $5,000 in settlement costs, and $7,000 of paying off the mortgage over 5 years, then we arrive at a total of $22,000. Did one partner contribute 70% of that $22,000, while the other 30%? If so, then the proceeds from the sale should divide 70-30 as well.
In some situations, one partner decides to stay in the house while the other leaves to find a new place of residence. When this occurs, there are some difficulties that can arise. Sometimes the partners agree that the one who remains in the house will take on full responsibility of the mortgage, but these agreements are usually made without consulting the lender. The truth is that both partners will usually remain responsible for the mortgage, as this is safer for the lender (the lender has no reason to allow one of the partners to be removed from the mortgage). The partner who leaves, therefore, will often have trouble obtaining a new mortgage since they are still partly responsible for the previous one as well. The only way to get someone off of the mortgage would be for the remaining partner to refinance in their own name.