NEW YORK - Like many young, unmarried women, Charlene Barr knew the value of a long-term real-estate investment.
What she didn't anticipate when she decided to buy a home with her then-fiance, however, was that they would split up, and she would never reap the profits of her investment. In the end, not only did she lose at love, "I lost my biggest investment: the house itself," Barr said.
With interest rates still low and home prices soaring, more and more couples are committing to home ownership before committing to marriage. But there are some considerations involved with buying a home for an unmarried couple, and couples should be aware of their rights should something go awry.
"Unmarried couples buying a home together should have the equivalent of a prenuptial agreement," said Lisa Schuchman, a Seattle estate-planning attorney.
According to the National Association of Realtors, 8 percent of U.S. households were owned by unmarried couples in 2003, up slightly from 2001. But research from the Centers for Disease Control and Prevention's National Survey of Family Growth shows that almost half of cohabitations break up within five years.
Barr said her lawyer suggested crafting a document that would protect both parties in the event of a breakup, but she didn't think they would need it.
"Since we were engaged and had already set the wedding date, we decided to waive that advice," Barr said. "Big mistake."
After the romance turned sour, Barr was able to recover her contribution to the down payment and closing costs, as well as some money she put toward renovating the house. But, because she hadn't taken precautionary steps, Barr lost any money she had contributed to the mortgage and monthly expenses.
To protect their assets, unmarried couples should consider legal documents like the one Barr's lawyer suggested, which would have protected both parties when they parted ways. But there are other steps couples should take before plunging into home ownership.
First, couples interested in buying a home need to realize they are making a commitment to one another, even if they don't intend to marry.
"Buying a house can be a bigger commitment than marriage," said Dorian Solot, co-founder of the Alternatives to Marriage Project, a nonprofit group based in Albany, N.Y.
Remember that home ownership is a long-term commitment and can lead to big problems if the couple isn't secure and confident in their relationship, Solot adds.
Fortunately for couples ready to settle down, being unmarried doesn't present huge barriers when it comes to financing a home.
"Couples are often surprised to find out that buying a house is within reach," Solot said. Mortgage lenders tend not to be concerned with the marital status of their clients, as long as they can pay their bills.
But marital status can affect eligibility for some of the perks available to homebuyers.
When Steve Yazzie, a Persian Gulf War veteran from Phoenix, decided to buy a home, he looked into a loan program sponsored by the Department of Veterans Affairs. But because he was applying for a loan with his partner, Eileen O'Connell, and she isn't legally his spouse, they were deemed ineligible.
Lawyers agree it is important to have both names on the deed of the house if the unmarried partners intend to own it jointly, even though sometimes having only one partner on the mortgage can get the couple a better deal on a loan.
Putting just one name on the title enabled Kris Denny and Clark Solomon of Texas to get a better mortgage rate.
Because she had lousy credit, Denny and Solomon found they could save money by only putting Solomon's name on the title. Although they split the household bills equally, Denny has no legal claim to the house, because there is no written agreement giving it to her.
Because couples often contribute different amounts toward the purchase of a house, they should devise a partnership agreement that includes a list of deal points, said Seattle attorney Mary Anne Vance. The pact should include details about how much each partner will contribute to the down payment, what percentage of each person's income should be put toward the mortgage and who will pay for other expenses such as repairs and remodeling.
Lawyers advise couples to discuss their options when things are going well, because that is when they are more likely to be fair and considerate. Vance suggests setting up a buy-sell clause that includes what will happen if one partner wants to remain in the house, and how they will determine the market value of their home in case they go their separate ways.
If Barr had set up this kind of contract, she could have protected her investment by spelling out how they would split up the house. Both Barr and her partner wanted to remain in the house, but it was Barr who finally gave in and left.
An agreement set up in advance could have forced her partner to sell the house to a third party, enabling them to split up the assets in a more equitable way.