I had fulfilled the American Dream, at least in my parents’ eyes. I had become a homeowner, thanks to a significant contribution from my mother. She had not only facilitated my entry into homeownership by providing me with the down payment, but she had also made it possible for my boyfriend to become a homeowner. I had been living with him for four years. I thought we were going to be together forever. So why not put his name on the mortgage? Bad move.
It was in Logan Circle, one of the hippest neighborhoods in Washington, D.C. It was “loft-like,” a catchphrase many developers were using in those days. It had high ceilings, exposed piping, granite countertops and stainless steel appliances in the kitchen, and hardwood floors. We were the first owners, and we thought we had made a wise financial move. But we paid $375,000 in January 2006, the height of the real estate market. A year later, after a brief engagement, we broke up and had to sell it—at a loss. My mother’s loss, truthfully, not mine. I felt horrible.
Buying the condo was not our biggest mistake. Buying it without having a thorough, honest conversation about our finances was. We had been together for years, but up until we had to fill out our paperwork to get our mortgage, I had no idea how much debt my fiancé was in. He had no idea how much debt I was in. We knew so much about each other—what kinds of movies we liked, our favorite and least favorite foods, our favorite books—but we had very little knowledge about each other’s finances.
Talking about your finances with your significant other is not sexy, but it is crucial. A Gfk Roper poll commissioned by website Divorce360.com found that money was second only to verbal and physical abuse as the main reason people get divorced.
“Money is one of the top three common sources of conflict that brings couples into therapy,” Karen Osterle, a licensed psychotherapist in D.C. told me. “In fact, some of people find it easier to talk about sexual matters than they do about money.”
Never is that conversation more important than when you’re thinking about buying property together. As much as you love each other, you have to protect yourself. I have to say, after my last real estate experience, I will never again buy property with someone I am not married to. Some financial advisors argue that it’s not necessarily a bad thing. I discussed this with Guy Cecala, publisher of Inside Mortgage Finance. Married or not, he told me, he didn’t think it made much of a difference. “You run the risk of getting a divorce anyway,” he pointed out. Fair enough. But if you decide to buy property with a boyfriend, girlfriend, or friend, please protect yourself.
Understand that homeownership takes on many forms, depending on your state of residence. Usually, you can be joint tenants, which means that you have equal shares in the property, and if you die, your partner inherits your share. Or you can be tenants in common, which means that you both own a share of the property, with the proportion spelled out in the agreement, and each of you designates an heir in the event of death, so your share does not necessarily have to go to your partner.
I know, it’s not sexy, but these decisions must be made. In fact, your bank will force you to make these decisions. And I would advise consulting a lawyer before you make them.
You might also consider drafting a written agreement that spells out in detail how expenses will be divided and what will be done in the event of a breakup. It’s just another coat of armor to protect you from a possible meltdown later.
I know this is the last thing you want to think about when you’re about to buy your dream home with your loved one. But trust me, it will be the best thing for your relationship—and your peace of mind.
Love and money are such a combustible mix. You have to do what you can to make sure you don’t end up getting burned.
