What Does Domestic Partnership Mean?
If you are planning on purchasing a house with a partner, you have to pay attention to a lot of details. One of the most important things you should consider is a potential split-up.
Of course, you hope this never happens, but you should anyway have an agreement in place. Attorneys should be consulted because they can offer you legal advice. Aspects that you should always remember are presented here. If you and your domestic partner split-up, you should know that a very good idea when it comes to agreements is for you require the selling of the house. This way, financial issues related to the home and mortgage won't be faced by anyone. The only thing that has to be solved here is the division of the sale's proceeds. The amount each partner receives is usually equal to his contribution, just as in a business partnership.
The process you will have to deal with will be complex in case your partner asks to keep the house and there is no agreement established. Valuing your property is the first thing you have to do to get an estimation. After this, the partner staying should pay the other one his part. But in most of the cases, there are no means to do this. That is the reason why the staying partner thinks of going for a home equity loan. But there aren't too many banks that will allow the approach. Another idea could be to remove the departing partner from the loan. If you take into consideration this shaky mortgage market, you will see that this isn't likely to happen. Removing one partner from the mortgage won't appeal to lenders because they aren't interested in taking repayments risks.
The staying partner can refinance the loan, having this way a chance to pay the equity of the departing partner. If you haven't bought a home with a partner already, you might want to think of letting the remaining partner selling the house or refinancing in a determined period of time, this way putting this responsibility on his shoulders. There can also be some harsh situations if you split in a declining market and your home will be worth less than what you paid. Refinance will be impossible and deficiencies will be faced by partners when they will pay off the mortgage.
This way, two alternatives will become available for you to examine. Either you opt to negotiate with the bank for a short sale, or you can have your home go into foreclosure. None of them represent a good solution and they will affect the credit of the partners. Of course, buying a home is a very nice thing, but it's critical to pay close attention to every single detail of the process. Even though you buy it with a partner, it can be special too, but make sure in case you break-up, you won't have to face troubles. It is better to be prepared for all potential situations in order to avoid major conflicts.