Buying a house together is a big commitment, but one that an increasing number of couples are deciding to make. 2020 saw a 60% rise in the number of mortgage applications from cohabiting couples and they are now the fastest growing type of household, according to the Office for National Statistics.
If you’re considering buying a property with your partner, there are a few questions you should consider carefully. These questions will ensure you’re ready for the commitment and have thought through the wider implications of purchasing your new home together.
What’s your budget? At first glance, this may seem like a fairly straight forward question. You may assume that your budget will be dictated by how much a mortgage lender is prepared to lend you, but that shouldn’t be your only consideration. Before you finalise your budget, you should take time to think about the financial agreement between the two of you. How much deposit will you each contribute? How will the bills be split? If one of you earns a higher salary, will you make a larger contribution to both the deposit and the repayments so that you have a larger budget, or are you keen to keep contributions 50/50? If you are planning to contribute different amounts, how will this be recognised in the official paperwork?
However you choose to split the costs, you may wish to consider putting together a Declaration of Trust with your solicitor at the point of purchase. A Declaration of Trust will officially outline the financial contribution each part has made to the purchase of the property and may detail how any profits should be split upon the sale of the property. This may not seem like the most romantic document to put together when purchasing a home with your partner, but it’s important to be sensible and protect your financial assets.
How will you choose your property? Once you’ve agreed on your budget and have an Agreement in Principle in place with a mortgage lender, you’re ready to start looking at properties.
When you purchase a new home with your partner, you may become aware of differences you haven’t previously noticed. You and your partner may be on the same page, or you may have very different ideas about what your home should look like and which area you should live in. Either way, you’re likely to discover that you have a different set of priorities.
A helpful exercise may be to sit down together and talk about what’s most important to you eg. location, size of property, nearby amenities, transport links etc. This will help you to decide on a joint list of property ‘must haves’. You can then move onto the extra things you would ideally like in a property but that may be negotiable if compromises need to be made.
Once you’ve agreed on your joint list of priorities, you can take a look at some online property listings and choose a few promising options to view in person.
Should you be joint tenants or tenants in common? Once you’ve found a property and are ready to start the conveyancing process, you will need to decide whether you want to purchase the property as ‘joint tenants’ or ‘tenants in common’. These are two different ways that people can purchase property together.
Joint tenants: Joint tenant jointly own the entire property. Even if one party puts in 90% of the deposit and pays 90% of the mortgage, both parties will have equal legal ownership of the property.
Tenants in common: Tenants in common each own a certain percentage of the property. If you are making an equal contribution to the cost of the property, you will likely each own a 50 percent share. If one of you is making a greater financial contribution you, you can agree that that person will own a greater share of the property and legally specify how much in a Declaration of Trust. At the point of sale, any profit from the property will be split according to the ownership split in the Declaration of Trust.
Is your partner someone you want to be financially linked to? If you’re considering buying a property with your partner, it’s important that you are able to have honest conversations about your financial history and anything that might negatively impact their credit score. Do you trust your partner to make wise financial decisions and act responsibly? When you purchase a property with another person, your credit score automatically becomes linked to theirs. Is your partner someone you can trust with your credit score?
What to do if you have a property to sell?
If one of you already owns another property, it’s likely that you’ll need to sell up before buying a property together. If you’re keen to sell your property quickly to buy your new home, you might want to consider using a quick house sale company. A house sale company can often buy your property in as little as a week, so it’s an ideal solution if you’ve already found your next home and need to free up some cash.
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