What does domestic partnership mean?

If you are planning on purchasing a house with a partner, you have to pay attention to a lot of details. A break-up might occur sometime and this is an aspect you must be aware of.

You can hope that this will never happen, but it is better to have an agreement in place. Legal advice can be offered by attorneys if you consult them. Anyway, here are some simple considerations to keep in mind. First of all, you have to know that the best method to design an agreement when it comes to home ownership as domestic partners is to ask for the home to be sold in case break-up happens. This way, financial issues related to the home and mortgage won't be faced by anyone. This way, you will only have to face the division of the proceeds of the sale. Usually, this is done based on the contributions of each partner, just like in the case of a business partnership.

On the other hand, if you don't have an agreement and one partner decides to remain in the home, the process is much more complex. Begin by checking the value of your home. The partner staying is required to pay for the part of the leaving partner. Usually, he doesn't have the possibility to do this. A home equity loan might seem a good option to pay the partner who leaves. In most of the cases, banks won't approve this solution. The departing partner can be removed from the loan as a different solution. This unstable mortgage market won't allow this to happen. Lenders don't want to take repayment risks and that is why they won't let one partner be removed from the mortgage.

In this situation, the remaining partner should refinance the loan and this way, he might be also able to pay-off the equity of the other partner. If you are only thinking of it, but you haven't purchased a property with your domestic partner, you should know that it is a good away to make the remaining partner responsible for selling the house or refinancing the loan. In a declining market, difficulties might be faced due to the fact that your property won't be worth the amount you paid for it. Partners will deal with deficiencies the moment they pay off the mortgage and they can't opt for refinance as an alternative solution.

There will be two possibilities for you to choose from. Either you negotiate a short sale with the bank or you have the house go into foreclosure. The partners' credit will be affected anyway since these aren't the perfect solutions. Of course, buying a home is a very nice thing, but it's critical to pay close attention to every single detail of the process. Even though you buy it with a partner, it can be special too, but make sure in case you break-up, you won't have to face troubles. Preparing for prospective situations is a good idea in order to stay away from conflicts.

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