Five things you need to know before buying a house with your partner
If you’re buying a house with your partner and don’t protect your share of the deposit or mortgage, you could be at risk of losing thousands of pounds if you later split up. We spoke to experts to find out what you need to know
No one prepares for heartbreak. But when it comes to buying a home with your partner, being prepared could avoid an expensive financial headache in future.
In fact, research by the property portal Zoopla found that more than a quarter of homeowners who bought a home and then split up with their partner lost out on money because it wasn't divided fairly.
With the latest UK house prices, it could be a lot of money you miss out on.
Failing to prepare means many couples could see their ex partner receive more than their “fair share” from a property if their relationship breaks down.
Despite the cost of living crisis and high mortgage rates, first-time buyers are continuing to pursue their dream of getting onto the housing ladder. According to the Barclays First Time Buyer Index, the number of first-time buyers purchasing a property has doubled over the past year.
But, the study also shows that more than half of first-time buyers don’t know what’s involved in the process of buying a house.
We reveal 5 things you need to know before buying a house with your partner to ensure the process goes as smoothly as possible, and that you protect yourself financially in case you split up. Warning! This could involve having some awkward conversations - but don’t worry, we have tips on how to do this too.
WHAT YOU NEED TO KNOW BEFORE BUYING A HOUSE WITH YOUR PARTNER
1. Make sure you’re both transparent about your finances
Getting a joint mortgage and buying your dream home with your partner might seem like a romantic gesture, but it’s also a huge leap in terms of commitment. There’s a lot at stake when it comes to your finances.
Zoopla’s research shows that nearly three-quarters of homeowners didn’t know what savings their partner had when they bought a home together, 45% of people didn’t know if their partner was in any debt and nearly a third of homeowners had no clue about their partner's salary.
It’s important to know what salary your partner is on so you can support one another, and also be aware of how much you could potentially bring to the table.
Mortgage lenders will look at your credit history, which is why it’s sensible to know if your partner is in or has been in any kind of debt. This will help to manage both of your expectations when borrowing.
Behavioural psychologist and relationship coach Jo Hemmings said: “Hiding this sort of information might be ok in the short term, but ultimately it can cause some distress, arguments and potential loss for you if you need to sell your home further down the line.
“So financial transparency is very important – especially if you are embarking on purchasing the biggest investment of your life, a home, together. Without that transparency, it would definitely indicate that your relationship is not a healthy one.”
2. Pay attention to joint tenants versus tenants in common
When buying a property with a partner, you need to decide whether you want to own it as “joint tenants” or “tenants in common”. Which one you choose affects what you can do with the property if your relationship breaks down, or if one owner dies.
As joint tenants, you have equal rights to the whole property, regardless of how much of the deposit or mortgage you have both paid. The home will automatically go to the other owner if you die, and you can’t pass on your share of the property to someone else in your will.
If you choose tenants in common instead, you can own different shares of the property, and it doesn’t automatically go to the other owner if you die (you can name a different beneficiary in your will).
The latter option tends to be more flexible, so could be a good choice if you’re unmarried and are both contributing different amounts to the property purchase.
3. Don’t assume a 50/50 investment means a 50/50 share if you’re married
If you’re married and both of you put in a 50/50 share on the property, don’t assume that if you were to divorce and sell the home you would receive a 50/50 share.
When splitting assets, there are many factors to consider under section 25 of the Matrimonial Causes Act 1973, such as your individual salaries and whether you have children. You may not get out of the property the exact share that you put in.
4. Consider creating a deed of trust or cohabitation agreement to protect your share
If you have paid a bigger share or all of the deposit, you could be left vulnerable to losing some of that money if you broke up.
Daniel Copley, consumer expert at Zoopla, said: "If couples are splitting costs in a set way - for example a 60/40 split on the deposit and mortgage contributions, they may simply want it legally clarified that this share of ownership will be recognised in the future. In this scenario, a deed of trust or cohabitation agreement may be a suitable option.”
Some couples split the deposit 50/50 and then pay different sums towards the mortgage on a monthly basis, depending on their income. In this case, one person is contributing more and might want to be recognised.
“Equally, one half of the couple may pay the entire deposit, but mortgage payments may be split 50/50. In these situations, the person who has contributed more to the deposit may want to protect this,” said Copley.
A deed of trust - also called a declaration of trust - is a legal document that outlines the financial intentions and decisions both parties made at the time of purchasing the property. It’s a good way of making both of your financial situations transparent from the beginning, and in the event of a divorce, the document states how the property will be split as well as legal fees.
A cohabitation agreement is for unmarried couples; as well as setting out arrangements for shared property, it also outlines what will happen to other finances and any children if you split up, become ill or die.
5. Get expert advice
Buying a house is a big commitment, with 85% of people saying it’s as big a commitment as marriage, according to Zoopla’s research.
So, it’s an idea to go to someone who knows what they’re talking about. With an expert present, it might even make the conversation less awkward.
Copley said: “Get expert advice during the buying process and come to an agreed plan of what is fair financially should the worst happen. It is also a good opportunity to lay out any additional ‘what ifs’ such as if one of you inherits a large sum of money and puts it towards paying off a lump sum of the mortgage."
HOW TO HAVE ‘THE’ CONVERSATION
Talking about finances isn’t an ideal topic of conversation over a candle-lit dinner, but it should pay off in the long run.
Here’s what behavioural psychologist and relationship coach Jo Hemmings suggests: “Schedule in a quiet time to have a transparent conversation about finances, such as who will pay for what and whether paying 50/50 is fair based on your earnings. And most importantly, what would happen with your stake in the property if you split up.
“Don’t make a big deal out of it, but equally don’t feel you need to justify yourself. Just suggest you have the discussion for clarity and to get it out of the way.
“If your partner responds badly to revealing their hand regarding their financial situation, it may be a red flag in your relationship.”
Vaishali graduated in journalism from Leeds University. She has gained experience writing local stories around Leeds and Leicester, which includes writing for a university publication and Leicester Mercury.
She has also done some marketing and copywriting for businesses.
When she is not writing about personal finance, Vaishali likes to travel and she's a foodie.
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