Buying a home is a major investment that some people are not ready to take on by themselves. If you believe that buying a home with your partner, friend, or family member is the best way to become a homeowner, it is important for you to take steps to protect your share of the investment. Two possible ways you can do this is to opt for a joint tenancy or tenants in common contract. To help you decide which is best for your situation, here is what you need to know.
What Does a Joint Tenancy Do?
A joint tenancy allows you and the other party to take ownership of the home you are buying as equal partners. Both of your names will appear on the deed for the home. If one of you dies while you both own the home, the surviving party will automatically gain 100 percent ownership of the property.
Although this seems like a simple way to solve the problem of who owns the home, there are some drawbacks to consider. For instance, joint tenancy does not give you the freedom to leave your share of the home to someone else. Even if you have children, they cannot inherit the property.
Another issue is joint tenancy might be irreversible. Depending on the state in which you live, you and the other party could be stuck with the agreement. As a result, the home would have to be sold to end the joint ownership.
You also have to consider that if the other party has credit problems and his or her creditors attempt to collect equity on the property, you likely would not have the legal ability to fight it.
What Does Tenants in Common Mean?
Tenants in common differs from a joint tenancy in that you and the other party do not have to own equal shares of the home. For instance, you could own 60 percent and the other party own 40 percent. Both of your names will still be listed on the deed though.
Tenants in common also differs in that you can leave your share of the home to someone if you die. To do so, you need to ensure the deed states the correct percentage that each party owns of the home and list a beneficiary.
Although it might sound like a more ideal situation, there is a drawback to consider. Ideally, you and the other party would agree to leave your shares to each other in your wills. However, this does not always happen. If the other party leaves his or her share to someone else, you could be tied to someone who has different home ownership ideas than you.
Talk to a realtor like RE/MAX ORANGE COUNTY EAST and lawyer to explore which option is best for your situation.Share