financing with domestic partner?

7 Replies

My marriage is not legally recognized in my state, and probably will not be in the forseeable future. (Thanks, Ohio!) 

My partner and I are both listed on the mortgage on the house we live in. I'm wondering if our legally unrecognized status will be a factor, negative or potentially positive, as we look into financing our first rental property. 

Does anyone have experience on the ins and outs of financing with a domestic partner? Should we form a LLC in order to give us the same status as someone whose marriage is legally recognized? Or would it be better to just apply for mortgages as individuals?

Thanks for your input!

Go individual if you can.  It will be the easiest way.  

Also forming an LLC will not get you normal conventional financing with a bank. Banks dont make loans to LLC's.

Is the financing different from a domestic partner vs. a non-domestic partner? I see partners and LLCs everywhere I look.  Is it different if you live under the same roof?  I have no idea what your answer would be, but it does make me wonder.  good luck

There's no difference with regards to financing for married vs unmarried, or in this case domestic partnership. Like Curt mentioned if you can qualify on an individual basis, you should both do that since there are limits to the number of conventional mortgages you can each get.

Agreed, I don't see much of a difference from a financing perspective. Although something I would clarify, but it is not as relevant to what you were asking, but some banks do make loans to LLCs now. The financing market has been swinging back now and a lot of the community / regional banks will in fact make loans to an LLC although they will want you to also sign personal liability backing it. However, the loan terms are more commercial terms so you will see shorter ammotizations and pay a premium on the interest rates. My advice, is in the beginning purchase in your personal name as you will get the best financing terms and once you get close to running out of slots, then buying in the name of an LLC can help continue your growth and by then you have a good track record as well.

Happy hunting,

Eric

Originally posted by @Curt Davis:

Go individual if you can.  It will be the easiest way.  

Also forming an LLC will not get you normal conventional financing with a bank. Banks dont make loans to LLC's.

Thaaaaaat's a broad statement, I know for a fact that CS Bank in Columbus makes conventional loans to LLC's. My business partner just got 5% on a 20 year.

@John Horner agreed. I have been doing several of my more recent deals financed directly to my LLC. My terms have been under 5% but unfortunately the bank I am working with only does 15 year ammotizations rather than 20, but there are plenty of banks and some I have worked in the past that will provide 20-25 year ammortizations. Typically, the interest rate is .25%-.50% higher, but then can sometimes be negotiable depending on your situation.

That said, for somone just starting out it probably makes sense to put the first few loans in their name (unless they are purchasing with a few other people) to get your choice of ammortization and the lowest rate, and quit claim it to an LLC if you decide you want an LLC as part of an asset protection strategy. However, when needed, financing to LLCs is definitely out there and viable.

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