*This post was created in collaboration with Mortgage Maestro.
Many Canadians don’t wait until they’re officially married before buying a house with their significant other. In fact, many couples don’t even have intentions of officially tying the knot before they purchase their family home together.
As of 2021, about 23% of couples in Canada were living common law, according to Statistics Canada. Among all adults in general, the percentage of common-law couples is 12.6%.
Out of the G7 nations, Canada ranks the highest in terms of the share of common-law unions, driven largely by the popularity of this type of relationship in Quebec. The latest Census numbers show that 23.3% of the total population aged 15 years and over in Quebec are in a common-law union. For comparison purposes, only 13.1%, 10%, and 8.6% of those in New Brunswick, BC, and Ontario (respectively), are living in a common-law scenario.
When it comes to buying a house, how does being in a common-law relationship differ from being married, or single? Considering the magnitude of the home purchase, it’s important to keep a few things in mind before buying a house as a common-law couple.
Can You Get A Mortgage As A Common Law Couple?
Yes, you can buy a home with your common-law partner. However, you won’t necessarily be considered common-law under the law just because you’re buying a home together.
Every province and territory has its own rules about what it means to be in a common-law relationship. This is a particularly important point if you’re looking to take advantage of the perks of homeownership that married couples have available to them.
When buying a house as a common-law couple, you’ll need to choose between a singular or joint mortgage.
Singular Mortgage
A singular mortgage means only one person’s name is on the title. That means that this person has full ownership rights to the property.
You may consider a singular mortgage if one partner has a bad credit score. Your partner’s bad credit may negatively offset your ability to secure a better rate. So, leaving their name off of the title might be a good idea in this case.
Keep in mind, however, that if you opt for a singular mortgage, the partner whose name is not on the mortgage or deed will not be entitled to any share of the property in the event of dissolution of the relationship. In this case, it may be worth considering entering into a contract that spells out each person’s interests in the property in case of a breakup.
Joint Mortgage
A joint mortgage involves at least two people who share the responsibility of repaying the mortgage. However, this doesn’t mean that each person shares ownership of the property. If both you and your partner want equal ownership of the home, this requires further action in addition to taking out a joint mortgage. More specifically, you’ll need to each be named as co-owners on the same deed.
Where Can You Get A Mortgage As A Common Law Couple?
Whether you’re looking for a joint mortgage or a regular mortgage, you can apply with most banks and credit unions. If you both have bad credit, consider applying with a private mortgage lender. You can also use a mortgage broker like Mortgage Maestro to help you filter through multiple lenders and find one that best meets your needs.
Who Owns The Property As A Common-Law Couple?
The owner of a home in a common-law arrangement is the person named on the deed. If only one partner is named on the title, then that person alone has the rights to the property. However, if both partners’ names are on the deed, then both own the home and have equal rights to the property.
There are two different ways that each partner may be named on the title of a home:
Joint Tenancy
This is the most common type of joint ownership arrangement. The property belongs equally to both partners and all associated rights and obligations are shared. In this arrangement, a right of survivorship exists, which means the property is automatically transferred to the surviving owner when the other dies.
Tenancy In Common
This is another type of joint ownership arrangement whereby the property is owned by at least two people, but there is no right of survivorship. That means that the home doesn’t automatically transfer to the surviving owner. Instead, each owner possesses their respective share of the property.
Property Ownership Rights Differ By Province
It’s important to note that the laws surrounding common-law couples concerning property ownership rights differ across the country. Couples involved in common-law relationships should understand the laws that apply in their province or territory.
Let’s illustrate how these rights may differ using Quebec versus Ontario as an example:
Quebec
Common-law definition: Couples must live together for at least 12 months.
Property Ownership Rights
In Quebec, common-law couples don’t have the same property rights as married couples. More specifically, people in common-law relationships in Quebec don’t have the following protections:
- They don’t have the right to divide the home if they break up.
- If the title is in one person’s name, the other individual doesn’t benefit from the protection of the family home in the event of a breakup.
- One partner can’t request support payments from the other partner after the dissolution of the relationship.
- If one partner dies, the other partner won’t necessarily inherit the family home if there is no will or if the partner is not named in the will.
Quebec is unique in that it recognizes “civil unions“, which provide both partners in a common-law relationship with an equal entitlement to assets acquired after the contract has been signed by both parties. Couples in Quebec have the option to enter into a civil union that provides the same types of rights as a married couple. This arrangement is only available in Quebec and is not applicable anywhere else in Canada.
Ontario
Common-law definition: Couples must live together continually for at least 3 years.
Property Ownership Rights
After living together continually for at least 3 years, partners in a common-law relationship will have the same obligations to each other as spouses in a marriage. However, common-law couples who break up don’t have the same legal rights when it comes to property ownership as married couples.
For example, if one partner passes away without a will, the surviving partner would not be entitled to the property.
How To Protect Yourself When Buying A House As A Common-Law Couple
Since common-law partners don’t have the same protections as married couples when it comes to property ownership, they may want to consider taking additional steps. Here are a few different documents that you may want to sign if you’re living in a common-law union:
- Cohabitation agreement. A cohabitation agreement is a legal document that allows common-law couples to detail each partner’s rights to the home, as well as other agreements that may not be covered by the law in the event of a breakup.
- Undivided co-ownership agreement. In this arrangement, each undivided co-owner owns a fraction of the whole property; no one owns a private portion. A property that’s held in undivided co-ownership has only one lot number, but it belongs to more than one person.
- Will. A will allows you to ensure your common-law partner will inherit your estate as you wish, including your home. This is particularly important if the home is owned solely by one partner. As mentioned, the home will not automatically pass on to the surviving partner in a common-law union when the sole owner dies, unless the deceased owner’s will specifically names the surviving partner as an heir to the property.
- Protection mandate. This document allows you to make important decisions about how you want your estate handled if you become incapacitated in the future, leaving you unable to make sound decisions. If this happens, your protection mandate allows you to designate your partner to care for you and your home.
Types Of Programs Common-Law Couples Can Use To Buy A House
If this is the first home that you and your common-law partner are buying, you may be eligible for several programs to help offset the costs of a home purchase and make it more affordable:
First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a tax-free savings account for first-time homebuyers to help save up for a down payment. Eligible applicants can save as much as $40,000 in this account to be put toward a home purchase.
An FHSA combines some of the best features of Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Accounts (RRSP). The tax-free feature allows you to avoid taxation on interest, capital gains, and dividends earned, like in a TFSA. Plus, account contributions reduce your taxable income, similar to an RRSP.
First-Time Home Buyers’ Tax Credit (HBTC)
The First-Time Home Buyers’ Tax Credit (HBTC) is a non-refundable credit that first-time homebuyers can claim when filing their income taxes. As a first-time buyer, you can claim up to $1,500 to help offset the costs associated with buying a home.
Land Transfer Tax Refunds For First-Time Homebuyers In Ontario
When you buy a home in Ontario, you must pay land transfer taxes. And if you purchase a home in the City of Toronto, you’ll also have to pay municipal land transfer taxes. This can amount to an extra few thousand dollars on top of all the other costs associated with buying a home.
To offset these extra costs, tax refunds are available to eligible homebuyers. For instance, Ontario first-time homebuyers may be eligible for a full or partial refund of land transfer taxes. The maximum refund amount is currently $4,000.
Home Buyers Plan (HBP)
The Home Buyers’ Plan (HBP) allows first-time homebuyers to tap into their RRSPs and use the funds for a down payment. Typically, taking money out of an RRSP means the funds would be subject to taxation. But through the HBP, you can withdraw the money tax-free.
You can borrow up to $35,000 through the HBP. The funds must be repaid, however. You’ll have up to 15 years to pay back the full amount withdrawn into your RRSP.
Final Thoughts On Buying A House As A Common Law Couple
People involved in common-law relationships should understand that they don’t have the same rights as married spouses do when it comes to property ownership. Before buying a house as a common-law couple, carefully consider whose names will be on the deed and how that may affect each partner’s property rights. Further, consider entering into a cohabitation agreement, which will protect both parties if the relationship ends at some point.
Mortgage FAQs
When is my partner considered a common-law partner?
- The person has lived with you in a conjugal relationship for at least 12 months
- The person is the parent of your child
- The person has custody of your child
