How to Combine Households When You Each Own a Home

Combining households is a complicated enough affair when you’re getting married, but what if you each own a home going into the marriage? Do you sell one and move into the other? Do you sell both and buy a new home together? How about renting one and living in the other?

Unfortunately, as wonderful as the idea of spending the rest of your lives together is, sorting out the financial implications isn’t very romantic. You’ll need to consider issues such as:

--Your finances individually and as a couple.
--The strength of the housing market where each home is located.
--The tax implications of each scenario.
--The desirability of each neighborhood and potential for each home to appreciate in value.

The Mortgage Bankers Association recommends starting by getting a copy of both your credit histories. You can get a free copy once a year at www.annualcreditreport.com. Realize that a bad credit rating by one spouse will affect the couple’s ability to obtain credit and the interest rates you’ll pay. If you own or buy a home together, creditors can try to seize joint assets to satisfy bad debts one spouse brought into the marriage.

When you combine households, you may consider turning one of the homes into a rental property. Rental income usually rises over time and can help balance your savings portfolio, the group says.

If you choose to sell a home as a single person, you can claim up to $250,000 in profit tax-free as long as you lived in the home for at least two of the previous five years. The deduction is $500,000 for married couples filing jointly, but only if both of you meet the residence requirement – in other words, if you lived together for two years in the home.

If you’re selling one or both homes and buying a new one together, it makes sense to have one real estate professional who understands your situation to handle all the transactions, says real estate agent and relocation consultant Pat Ratz of Coldwell Banker Advantage in Raleigh, N.C.

“That agent will know more or less the bottom line of what the present house is going to sell for and be able to take them in the right direction (with) the new home,” says Ratz, whose brokerage is on the RealEstate.com network. “You’ll have someone that’s a sounding board for your ideas and can help put all your priorities in order.”

The agent can figure out how much house the couple can afford to buy together based on the prices their current home(s) will likely fetch in the market, she says, and how to wed the lifestyles of each partner into a home that will suit them both when they combine households.

Let the romance begin.