Buying a home with a partner is both a significant life and relationship milestone. For couples, it marks the beginning of the rest of your lives together. Here’s what you should consider when purchasing a property with a partner to ensure your purchase goes smoothly.
The current market
Commenting on the current market and how this will affect couples looking to buy a property, Shilpa Bathija, Sales Director of Winkworth Kingsbury says: "In the current property market we are seeing a trend where first time buyers are finding it difficult to climb the property ladder. Opting to purchase a property together takes the burden off of a single person and becomes a shared responsibility. Moreover, with rising interest rates, affordability becomes more of a concern. By sharing the mortgage, not only do buyers reduce financial strain, but they also leverage the added benefits of purchasing power. Don't hesitate to discuss your finances with professionals who can advise you on buying a home, and discuss your options together to ensure you are on the same page and have realistic expectations about the home you intend on buying."
Open and honest communication
Buying a home together can be an emotional process. By engaging in an open and honest dialogue with your partner you can ensure that you both feel listened to and can address each other’s concerns.
Joint Tenants vs Tenants in Common
When buying a home with a partner, there are two main types of ownership: Joint Tenants and Tenants in Common. Joint tenancy is a type of co-ownership where both individuals own the property together. In the event of one partner's death, the surviving partner inherits their share – this is called the 'right of survivorship'. It's a popular choice among married couples or partners. In a tenants in common arrangement, each partner holds a designated share of the property, which may be equal or unequal. This setup provides greater flexibility, allowing each party to bequeath their share to a chosen beneficiary in their will, rather than it automatically transferring to the other owner.
Financial contributions and legal agreements
It's not unusual for one partner to contribute more financially to the property than the other. In such scenarios, it's recommended to draft a ‘Declaration of Trust’ or ‘Trust Deed.’ This legal document sets out each individual's financial input and explains how proceeds will be distributed in the event of the property's sale.
Joint mortgages
When securing a joint mortgage, both parties bear equal responsibility for mortgage payments, irrespective of individual earnings or contributions. Having an open discussion about finances to ensure that both partners are comfortable with the commitment is important.
Planning for the future
Life is unpredictable. Although you’ll hopefully never break up, it can be useful to plan for the future by discussing what would happen to the house in the possibility of the relationship ending. A Cohabitation Agreement can establish clear guidelines for such circumstances, offering both parties clarity and protection in the event of a break-up.
Legal advice
Getting legal advice is necessary to understand all the implications of joint ownership. Also, it can be a good idea to conduct a comprehensive homebuyer survey which will tell you everything about the conditions of the property and required repairs, helping to prevent future disputes.
Budgeting
It's important to budget not only for the mortgage but also for various associated costs, such as stamp duty, solicitor fees, survey expenses, and potential repairs or renovations. Establishing a joint savings plan for these expenditures can mitigate financial strain down the road.
Insurance
Considering life insurance policies that cover the mortgage in the event of one partner's death is prudent. Moreover, it's essential to ensure adequate home insurance to safeguard your joint investment against unforeseen events.
Credit scores
Both partners' credit scores wield significant influence over the mortgage terms provided by lenders. Prior to applying for a mortgage, it's a good idea to check your credit scores to secure the most favourable deal available. Engaging in discussions about long-term financial goals, such as retirement planning and investments, is crucial. Understanding each other's future financial aspirations enables you to make informed decisions regarding property investments.
Being prepared
Adapting to life changes is crucial, so it's wise to periodically review and possibly update your agreements, such as Trust Deeds or Cohabitation Agreements, to align with your current situation. Additionally, establish an emergency fund to cover potential unforeseen expenses like job loss, illness, or urgent property repairs. This can offer financial security and peace of mind.
Implications for unmarried couples
For unmarried couples, you should understand the legal implications, as your rights may differ from those of married couples. Seeking legal advice can help ensure both partners are adequately protected.
Getting help from the experts
Finally, don’t hesitate to get help from financial advisors, legal experts, and property professionals. Their expertise can be essential in buying a home with a partner. If you’re considering buying a home with your partner, Winkworth estate agents are here to guide you through every step.