Whether you consider yourself common-law spouses or just two people in a committed relationship, taking the plunge and buying a home together is a serious endeavour.
In this guide, we'll take you through exactly what's required for buying a home as an unmarried couple.
In Canada, the law makes only a few distinctions between an officially married couple and a common-law couple that effectively function like a married couple.
The primary difference is that an officially married couple acquire their status on the day that their wedding becomes legal while common-law relationships must be established by co-living (living together in the same place) for a certain number of years. The laws on just how long a couple must live together before becoming a common-law equivalent of marriage vary from province to province.
There is, however, a difference between officially married couples and common-law couples when it comes to divorce as common-law partners do NOT have an automatic right to a share in the marital assets (including ownership of a home). Unmarried partners can, however, file a claim for property acquired during the cohabitation.
Anyone can buy a home, including single people on their own, but there are a number of important tax credits and government incentives that are only available to spouses (and common-law partners), so understanding your legal status as a common-law "adult interdependent partner" or an unmarried couple living together is an essential consideration to make when buying a home.
As with all important legal issues, consult a professional to learn about your rights and responsibilities before making a life-changing decision like buying a house together.
When it comes to applying for a mortgage loan, the bank will not care whether you're legally married, common-law partners, or simply two unmarried people.
What matters to the bank is your (combined) credit score(s), income history, and ability to repay the loan. As far as the bank is concerned, three people, four people, or even 10 different people can jointly apply for a mortgage. The bank's number one concern is repayment, and the bank is happy to have as many people as necessary co-sign for the loan.
It is also possible for one person to apply for the loan by him/herself without any need for their partner to qualify or provide documentation to the bank. This person can then let their partner (or anyone else) live in the home. Your best route may be something you need to ask a mortgage lender about.
Once you've been granted a loan and have purchased the house, ownership of the property is an important technical issue.
If you're officially married, the process is simple. Both partners will own the property as "joint tenants" or "tenants in common." If one person dies, the other person will automatically acquire sole ownership of the property. And in the case of a divorce, both partners have equal claims to all marital property, including the home.
If you're an unmarried couple, you have several options. You can similarly register joint ownership which functions exactly the same as if you were officially married.
Or you can register the property as having a single owner, meaning that person has all the rights to the home. Even if the other partner is a co-signatory to the loan, they won't have any rights because being a co-signatory simply means that they're obligated to pay back a loan, not own the house.
What matters is how the property is registered once it is purchased.
There is a slight difference between "joint tenants" and "tenants in common." Joint tenants mean that every member has an equal share (two people each have a 50% share while three people would each have a 33% share, etcetera). "Tenants in common," however, can be tailored to give different portions to different owners. For instance, one partner might have 90% of the rights to a property and the other partner has just 10%.
The key technical difference between "joint tenants" and "tenants in common" is that joint tenants can only pass on the property to someone else (such as children) in the event that they are the sole owner (i.e. the other joint tenants have died) or if all joint tenants agree. For "tenants in common," it is possible to sell off (or give away) their portion to anyone they choose even if the other "tenants in common" are still alive and do not agree.
With legally married couples, the law is very clear. Both partners have equal ownership, and both partners have an automatic claim to the home in case of divorce.
With common-law partners, however, there are no automatic entitlements to property (such as owning a home) in the case they separate. Many couples, therefore, choose to sign a cohabitation agreement that outlines the equity each person puts into the home, including paying off the loan, repairing the house, decorating the house, maintaining the property, and other contributions.
When it comes to buying a home, anyone is eligible, and unmarried couples can choose to jointly apply for a mortgage or just one partner can go it alone. The key difference for unmarried couples is understanding that the ownership of the property is based on how the property is registered (joint ownership, single ownership, or tenants in common) and any other agreements (like a cohabitation agreement) that will affect what will happen in the case of a divorce (or splitting up).
Due to the enormous significance involved in buying a home together, unmarried couples are strongly urged to consult with a legal professional before making any final decisions.