For many couples, buying a home with a significant other is often the next logical step to take to solidify a relationship. However, it may be confusing as you may not know what steps to take to make your dreams of owning a property together a reality. We’ve compiled a list of key things to keep in mind when taking a step towards joint homeownership with your loved one to make the process as seamless as possible.
Here are 5 key things to consider prior to buying a home with your significant other:
1. Consider both you and your partner’s finances
Before buying a property with your partner, you both need to be transparent about your finances. Are you both in a financial position to purchase a new property? Think about all the costs associated with purchasing a home.
Remember that you won’t just be paying for the mortgage, so make sure you factor in the down payment, transfer fees/closing costs, moving costs, repairs, maintenance, and living costs into your budget.
2. Consider how you’ll split the mortgage, maintenance and repair costs
You and your significant other should also discuss how you’ll split the bills. This is all dependent on how much money each of you makes.
If you don’t split the mortgage and bills equally, consider how this may affect your ownership agreement. If you were paying more for the mortgage, would you be okay with your partner owning half of the property, and vice versa? Ask yourself tough questions and discuss this honestly with your partner.
Ironing out how you’ll split the bills will not only make the process of purchasing a home easier, but it’ll make living in it easier too as you’ll both be on the same page with regards to household finances.
3. Get a lawyer to draw up a contract/co-ownership agreement
Don’t rely on verbal agreements when buying a property with your significant other. What happens if you split up or if an unfortunate circumstance such as death occurs?
Having a lawyer draft a written agreement detailing the conditions of ownership as well as what should happen in the event of separation or death will protect both of you from experiencing an unpleasant split or being potentially left with a huge financial burden.
With regards to a co-ownership agreement, couples need to be aware of the various forms of property registration, namely: sole ownership, joint tenant ownership and tenants in common ownership.
Joint tenant ownership gives both parties an equal share of the property, meaning you both have equal ownership and rights to the property. Should you or your partner die, the property will be passed onto the surviving partner that owns half. The tenants in common ownership registration allows couples to own a percentage of the property, which means you both have to decide what percentage you each hold. In the event of death, the party’s percentage is passed onto their heirs.
It is recommended that unwed couples also specify whose name will be written on the title deed and consider the effect of a split on your mortgage. Will you be able to refinance the home? What if the bank refuses to refinance because you don’t qualify for the loan on a single income? Consider selling the home within a certain amount of time should you separate. Be sure to have all of this in the contract.
4. Open a joint account to pay for costs associated with owning a house
Having a joint account is a great way to keep track of all finances related to the property. From this account, you can easily pay the mortgage, home insurance, transfer fees, and other property-related costs.
5. Keep track of finances
You need to keep a clear record of the money spent on the property. This is very helpful not just for budgeting, but also in the event that your relationship dissolves. Keeping track of who pays what and who pays more will validate the partnership agreement should you decide to go your separate ways.
In addition to this, keeping track of your finances will also help you budget clearly and pay off your mortgage sooner rather than later. It’ll put the both of you in a great financial position and give you the ability to potentially invest in other properties together in the future.
By using the 5 tips above, you can make your dream of purchasing a property with your significant other a reality.