Shortly before settlement (or sometimes even at settlement), the settlement agent will ask the buyers how they wish to take title to the property. Co-buyers have several options to consider:
- Tenants in Common: this is the default form of multiple ownership title, and any number of borrowers may own the real estate. One co-owner may sell or pledge as collateral their interest without the others’ consent, and upon an individual owner’s death that person’;s interest is inherited by his heirs. Owners may hold unequal percentage interests.
- Joint Tenants (with Rights of Survivorship): This is used frequently by unmarried co-owners, as the interest of an individual is vested in the remaining joint tenants upon one’s death. Each co-owner has an equal ownership interest, and any co-owner may sell or pledge their interest as collateral without the consent of the others.
- Tenants by the Entirety: This form is reserved exclusively for (legally) married co-owners, with each spouse having an equal percentage interest, and neither spouse may sell or pledge as collateral their interest without the other’s consent. Upon death of one spouse, that person’s interest is vested in the surviving spouse, and upon a final divorce decree this type immediately converts to tenants in common.
There are several other types (living trusts, entity ownership) available, but these three cover the majority of residential real estate transactions. If you are not sure how to take title, you should consult with the settlement agent or an attorney.
As an aside, when you’re taking title jointly, it’s an excellent time to review your insurance coverages and, in particular, life insurance. With certain title choices, if something should happen to one owner, both the property AND the mortgage goes to the survivor.