| March 16, 2015

Millennials say, “Mortgage First then Marriage.”

Is flying in the face of tradition a better financial decision?

A third of millennials are taking out mortgages with their fiancé before walking down the aisle. A trend some argue could be disastrous for the couple’s relationship and finances – but could it really?

Millennials are intent on going against traditional norms and not following their parent’s footsteps – from their views on money and banking to when they decide to become parents  to now breaking nuptial norms of getting a mortgage before marriage.

In the ’70s, only 10 percent of couples cohabitated before getting married but the younger generation is pushing that norm out the door and creating new ones that they believe are better financial choices.

A recent survey by Redfin, a real estate brokerage company found 38 percent of millennials (those aged 18-34) say they would (or have) put off a wedding and/or honeymoon in order to afford to buy a home.

Given the difficulty of splitting assets between divorcing couples, economists say it is even more difficult to split assets between unwed couples. As a result, they are concerned about the potential financial losses that could be involved should the relationship go south.

“Breaking up is hard to do but splitting financial assets makes it even harder, especially considering the fees and closing costs that are associated with buying and selling a home, which if done too soon can wipe out all the equity accumulated,” Redfin’s chief economist Nela Richardson says. “A house for most people is a long-term asset, which it should be if you are looking for a return on your investment.”

While some folks find signing the dotted lines before tying the knot as a recipe for financial disaster, others think it’s a romantic move that can foster a stronger bond between couples and their finances. Those who have gone the untraditional route according to the survey say, “It just seemed more practical to put [the] money toward the purchase of a home instead of a big party.” 

The cost of that party according to TheKnot.com, an all-things-wedding website, is $29,858. That’s just the cost of a wedding these days minus the honeymoon. Considering that a 20 percent down payment on a $150,000 house is $30,000, it makes sense to spend the price tag of a wedding towards a mortgage down payment instead. Financial experts applaud millennials for such thought processes and financial decisions. This also further supports the idea that millennials are perhaps becoming more financially savvy than their parents.

“It might sound a tad unromantic, to get door bells before wedding bells but it may be the right choice for a couple in certain situations,” Maria Gaitan, Consolidated Credit’s Housing and Development Manager says. “Logically and financially speaking it makes sense to put a down payment towards a home so you can start to establish yourselves instead of wasting the money on an expensive wedding. It is a move that could help prevent the marriage-killing money fights that affects majority of divorcing couples. Splitting assets between couples who aren’t married might be challenging, but joining finances before joining hands may foster a stronger bond between and keep them from becoming a divorce statistic.”

Data shows that 50 percent of marriages end in divorce, and researchers say arguments about money are the top predictor of divorce. Could joining finances and sharing living quarters before getting married save the marriage even before getting married?

Between 2006 and 2010 the Centers for Disease control (CDC) surveyed 22,000 men and women ages 15-44, 40 percent of whom were married. The survey found those who were engaged and living together before the wedding were about as likely to have marriages that lasted 15 years as couples who hadn’t lived together.

The data told a different story for the couples who were living together but weren’t engaged  their marriages were not as likely to survive the 10- and 15-year marks. 

These findings support Gaitan’s take that getting a mortgage before the marriage might be good for both the marriage and the marital finances. 

Richardson on the other hand cautions that, “A couple looking to make some money in the future from their joint home purchase should be sure that the relationship is ready to weather that kind of commitment.”

Gaitan says no one knows for certain whether their union will stand the test of time especially since people keep changing and evolving. No one gets married to divorce later, but it happens regardless of whether the marriage route precedes the mortgage route. 

The most important measure is to draft a cohabitation agreement before moving in together detailing how you plan to split assets and debts to keep your wallet and sanity intact. Exercise healthy financial habits and take advantage of the wealth of resources out there like Credit Counseling and pre-marital and marital counseling designed to help individuals and couples with both their financial, marital and common-law relationships.

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