4. Enlist the Services of an Attorney
Before you can consider signing a contract, there are key items that must be settled in writing. The advice of a lawyer can be helpful in choosing the form of ownership and in drafting a legal document to meet specific requirements. According to Haber, a good lawyer will make sure to document the proportionate amount of each person’s financial interest in the property; division of maintenance costs; who pays the bills and when; methods of dealing with a partner who fails to pay at the required time; and how the household will operate and detailed procedures for the equitable dissolution of the partnership.
5. Prepare a Property Agreement
A contract between the parties is vital, says Haber, as is listing each person’s name on the deed and the mortgage papers. The percentage of ownership must be clearly stated in the contract, including details of each person’s share of the down payment and the way in which mortgage payments will be divided. This sets the stage for deciding each one’s share upon sale.
6. Agree to Cohabitation Terms
In the event of dissolution, each individual must be protected. The cohabitation agreement will cover how both parties will part ways to ensure an orderly separation. Haber says one of they key provisions here is to provide each partner with a first option on the other person’s interest in the property. It is also a good idea to include a three-month notice period in the event someone has to leave. Procedures may also be outlined for independent appraisal so that both people have an equitable way to establish their interest when the arrangement ends.
7. Invest in Term Life Insurance
Buy a term life insurance policy and name the other partner as beneficiary. This way, the entire mortgage will be paid off by the insurance policy in the event of an unexpected death.
