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Unmarried co-buyers have special concerns

Tenants-in-common’ is the route to take in the game of life

June 20, 2008

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The best way for most unmarried co-buyers to take legal ownership of a new home is to declare themselves as "tenants-in-common," rather than "joint tenants."

Q: I am 45 years old, and my fiancee is 47. We are going to get married on Jan. 1, but we are buying a house now because prices and mortgage rates are so low. How should we "take title" to the house?

A: Most married couples usually hold title to their homes as "joint tenants," but it's usually best for unmarried buyers to take title as "tenants-in-common" - even if they plan to tie the knot soon.

If you and your fiancee take title as joint tenants, your half-interest in the home would automatically pass to her upon your death. Likewise, her 50 percent would go to you if she died first.

Taking title to the home as tenants-in-common, or "TIC," would provide more flexibility. That's because either of you could will or sell your respective interest in the property to whomever you wish. You should certainly take title as tenants-in-common if either of you has a child from a previous marriage and wants your offspring to eventually inherit your personal stake in the home.

I don't want to appear unromantic, but taking title as tenants-in-common rather than joint tenants also could make things easier if you purchase the house now but later decide to cancel the wedding. If the breakup turned nasty and the two of you couldn't agree to sell the place or keep it, either one of you could sell your 50 percent stake to an investor without first getting the other's approval.

Q: Is it true that Leona Helmsley, who owned the Helmsley Hotel chain, left $12 million to her dog when she died last year?

A: Yes. Dubbed "the Queen of Mean" by the New York press for the way she treated her hotel employees, the late Mrs. Helmsley set aside $12 million for the future care of her beloved Maltese dog, aptly named "Trouble."

A judge recently ruled that the gift was excessive, and cut the dog's share of the hotelier's $4 billion estate to a mere $2 million. Apparently, it's "ruff" times for everyone.

Q: I am trying to complete a long application to refinance my mortgage. One part of the application asks me to list my "installment debt," but another part asks me to list my "revolving debt." What's the difference?

A: The primary difference is whether you or the lender decides how much must be paid each month.

Credit-card debt is a good example of revolving debt: You can choose to make the minimum payment each month, or add some extra money to pay the balance off faster. Each dollar you pay also restores your borrowing power by pushing your credit limit back toward its original level.

A fixed-rate mortgage or auto loan is the best example of installment debt, because the lender (not you) chooses a set repayment schedule when the loan is first issued and you don't have much leeway in deciding how much must be repaid each month.

Q: You wrote that every buyer should make his or her proposed purchase contingent on the house first passing the inspection of a professional home inspector before the sale closes. I can see why it would be important to hire a "pro" if the house is more than a few years old, but is it really necessary to pay for an inspection of a brand-new house like the one we are planning to buy in a local housing development? It seems like it would be a waste of money, especially because our builder has provided us with a certificate that says the new home that we want to buy has been approved by county inspectors.

A: Every buyer should make the offer contingent on first receiving a satisfactory report from a professional inspector, even if the home is brand-new.

True, builders cannot offer a new home for sale until it has been approved by a city or county official. But the primary job of a government inspector is to ensure that the home simply meets local building codes: They are not authorized to render a private opinion about the home's quality of construction. Only a private-sector inspector can make such judgments.

No buyer likes to pay the $500 or so that a typical inspection costs, but the fee pales in comparison to the risk you would take if you didn't have a private-sector professional check the property out before you closed the deal.

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