Sep 2013 30

Mortgage Before Marriage in Canada – What Are Your Options?

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Lovers by Stephen Cleary
Lovers by Stephen Cleary

An increasing number of young Canadian couples decide to invest in real estate before they get married. According to a 2011 survey conducted by TD Canada Trust, young buyers — driven by low mortgage rates and high rents — want to build equity, and they usually prefer condominiums. Chief executive of the Greater Vancouver Home Builder’s Association, Peter Simpson, remarked,

They look at rental rates in an era of low vacancy and they figure they can put their money to work for them. They want to jump on the equity train right away and build equity.

In many cases, this means purchasing residential property with a partner before getting married. According to Canadian census data on families, households, and marital status released in 2011, the number of common-law couples in Canada rose by 13.9 per cent between 2006 and 2011. This figure reflects in the increasing number of young couples who purchase their home before marriage.

But it's important to realize that the property rights of couples in a common-law relationship differ from those of legally married couples. Jennifer Krob, a Toronto family lawyer with Heyday Green PC, pointed out,

Many people don’t realize that unmarried spouses don’t automatically have the same property rights — for them, it can be an uphill battle to get back what they’ve contributed.

Westcoast Contemporary Houses by pnwra
Westcoast Contemporary Houses by pnwra

Common-Law Couples in British Columbia

Under BC’s Family Law Act, which came into effect this March, common-law couples that have lived together for two years have the same rights and responsibilities as married couples. The provisions of the new, unique act stipulate the same legal rights to common-law couples who’ve lived together for over two years that married couples have? for purposes of property division in case they split up. These rights include a 50-50 split of shared debts and assets, excluding pre-relationship property, inheritances, and gifts.

Georgialle Lang, a Vancouver family lawyer and arbitrator, noted that it will be interesting to see if young couples who have been together for a few years will start making claims. However, she added,

It cuts both ways; it’s good for common-law spouses to receive the status of a married partner, but if they’ve married wealthier people, they lose on the other end because the assets their partner brought into the relationship don’t count.

Family lawyers across BC advise common-law couples to sign a legally binding co-habitation agreement. It's a legal document outlining how you and your partner want to deal with potential issues in case of a future breakup. It provides an opportunity to discuss property issues and it also encourages young people to talk about their future life plans. Toronto-based realtor Lauren Haw suggested,

You really need to look at the long-term picture when going through this process, because as soon as you buy a place, you’re locked into a mortgage for a certain period of time. So what happens if you break up and now have to carry the mortgage on your own?

Lovers by Alexandre Dulaunoy
Lovers by Alexandre Dulaunoy

There are two typical solutions of owning a home with a partner before getting married. You can either purchase a house together, or one of you can buy the home while the other lives there. In case of purchasing a home together, you can do so on the title as joint tenants or as tenants-in-common."Joint tenants" means that two (or more) people acquire an equal, undivided interest in a property. Both people thus own the entire home and have an equal claim to the house. When one person dies, that person’s share automatically goes to the survivor or survivors. On the other hand, a "tenants-in-common ownership" signifies that two (or more) people acquire interest in a single property, deciding whether they want to own the home equally, or if one will have a greater share. Each of them may sell or bequeath their interest, and if one partner passes away, it's their will that decides who will receive their share of the ownership.

Even though the new BC Family Act grants a higher level of property protection for people living together in unmarried relationships, experts recommend consulting a lawyer before deciding to purchase a home before marriage. A frank discussion leading to an agreement with your partner could help you prevent the inconvenience of future property disputes. Especially in case of such serious decisions as buying a new home with your partner, you should act rationally and reach an agreement in case things don’t go as planned.

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