| Are you considering buying a home with a partner or | | | | worth the partner staying in the home may not have |
| as an unmarried couple? As exciting as this | | | | the means to pay off the departing partner. |
| experience is you need to go in with your eyes open. | | | | Taking out a home equity loan to pay the departing |
| You owe it to yourself to plan for the unthinkable--a | | | | partner may come to mind. However, no bank is likely |
| split-up. | | | | to allow this approach. From there perspective it would |
| Hopefully, this will never happen. But, if it does and you | | | | only increase their risk with only one party left to pay |
| don't have an agreement in place you are likely to | | | | the mortgage and more of the home's value financed. |
| have a legal mess on your hands. Consult your | | | | 3. Removing the departing partner from the mortgage |
| attorney for legal advice, but here are a few simple | | | | Getting the departing partner off the mortgage is |
| considerations. | | | | probably the most challenging step in the process, |
| Should a Split Trigger the Sale of the Home? | | | | especially in a shaky mortgage market. The lender has |
| The cleanest way to design an agreement for | | | | no incentive to take more repayment risk by removing |
| homeownership as domestic partners is to require the | | | | either party from the mortgage. |
| home to be sold if a break-up occurs. This | | | | If possible, the remaining partner should try to refinance |
| arrangement avoids either partner having any lingering | | | | the loan in their name only. This might also allow for the |
| legal or financial issues with the home or mortgage. | | | | remaining partner to do a cash-out refinance to |
| The only issue to resolve in this type of agreement is | | | | pay-off the equity of the departing partner. |
| how to divide the proceeds of a sale. | | | | 4. The burden should be on the remaining partner |
| The division of net proceeds from a home sale is | | | | Assuming you haven't already bought a home |
| often done according to each partner's contributed | | | | together and you are reading this article first, another |
| equity, much like a business partnership might be split. | | | | appropriate part of an agreement would be to simply |
| What to Do if One Partner Remains in the Home? | | | | put the responsibility on the remaining partner to |
| If there is no agreement and one partner wants to | | | | refinance or sell the home in a defined period of time. |
| remain in the home--it gets much more complex. | | | | How Do You Split in a Declining Market? |
| In this scenario here are a couple of things to think | | | | All of this considered, in the current market the most |
| about: | | | | likely scenario is that the home is worth less than the |
| 1. Valuing the property | | | | partners paid. Of course, this means that refinancing is |
| Even with an agreement, if the partners decide not to | | | | out of the question and any sale would require the |
| sell the home then valuing the home and splitting the | | | | partners to pay any deficiency in paying off the |
| equity can be challenging. There are numerous ways | | | | mortgage. |
| to approximate the value of a home and all have a | | | | This really leaves two options: negotiating a short sale |
| good deal of variability. | | | | with the bank or having the home go into foreclosure. |
| Regardless of the appraisal method you chose, it | | | | Neither is ideal and both will significantly impact the |
| should be defined specifically in your partnership | | | | credit of both partners. |
| agreement. You should also define who will pay for | | | | Buying a home is a wonderful thing. Buying it with |
| the cost. | | | | someone else is equally special, but give yourself the |
| 2. Paying off the departing partner | | | | peace-of-mind that you have a plan if things don't go |
| Even if you can figure out how much the property is | | | | as planned. |