Buying a house as a couple can be equal parts exciting and nerve-wracking.
Exciting because it can feel like the start of the rest of your life together, with your future stretching out before you. But nerve-wracking because it’s almost certainly the largest financial investment you’ll make in your relationship.
While no amount of planning will completely remove all stress from the process, you and your partner can take steps to ease your anxieties and increase your chance for success.
You and your partner should sit down and have a conversation about the motivations, hopes, and realities that will shape your home search. Questions to ask yourselves include:
Why do we want to buy a house now?
How much work are we willing to put in?
What do we want in a home?
How much can we afford
What is our budget – and timeline – to save?
How will we divide the cost of the home?
What type of ownership should we choose? (more on that later)
What happens if we break up? (more on that later, too)
None of us has a crystal ball, alas, but the joint purchase of a home is a long-term investment that requires some reflection on what our future may hold.
Some things to consider:
Do you have children? Are you planning to have children? Is there a chance that aging relatives could eventually move in? All of these will affect how much space you’ll need. If you have kids, you should also consider the local school situation.
Is the commute acceptable for both partners? How rooted in place are your careers? Are you only living in a particular place because of your job and, if you change jobs, will you want to remain there? Not all careers can be pursued equally in the same location, so you’ll need to consider whether to anticipate the need to move to a new town or city.
These issues are tough to contemplate, but you should also consider gaming out worst-case scenarios. If you have health concerns, is there adequate treatment nearby? What will happen with your property if an aging parent needs help and you want to relocate to be close to them? If either of you becomes unemployed, can you still cover your mortgage and will you be able to find new employment? What happens if you break up?
Whether married or in a registered civil partnership on the one hand, or together but unmarried on the other, the status of your relationship matters for property ownership.
In general, people living together in unmarried relationships have fewer defined rights than those who are married or in civil partnerships.
The key distinctions for joint home ownership are legal, especially with regard to when and if the couple decides to separate.
As a result, you should discuss what may happen if your relationship ultimately ends, whether because of death, separation, or other cause.
With married couples, the court decides how to deal with all assets of the marriage, including the jointly owned property, and will redistribute them fairly. If both partners in the marriage want their wishes taken into account, they need to come to a clear agreement when purchasing the property.
Unmarried partners do not have such a clear legal recourse.
If an unmarried couple sells their jointly owned property, then the proceeds are distributed solely based on the couple’s own intentions.
It’s therefore imperative that people in unmarried relationships issue clear written instructions to their solicitors about what they want to happen in the event of the death of either partner, or following separation.
But the key point is that an unmarried person doesn’t have a right to the fair distribution of assets accrued during the relationship.
Whether a couple is married or unmarried is also relevant to other issues related to property ownership.
For instance, if you’re married and your spouse dies, you’re exempt from paying inheritance tax on property (or money). Unmarried couples, however, aren’t granted that right.
Marriage or civil partnership also means an effective doubling of your Capital Gains Tax exemption, so you and your partner can transfer assets between each other tax-free during your lifetime.
But if you’re unmarried or not in a civil partnership, you’re unable to transfer assets – including property – between you without paying Capital Gains Tax.
Once a couple finally decides on its dream property, it will generally choose between two types of ownership.
Joint Tenancies (sometimes called Beneficial Joint Tenancies)
Tenants in Common
Most married couples and people in civil partnerships choose Joint Tenancies, which allows for property ownership in equal shares.
Upon the death of either person in a joint tenancy agreement, the property becomes the sole property of the survivor.
Yet joint tenants are also legally considered a single unit. That means it isn’t possible for one tenant to take out a mortgage only on their share of the property. If a mortgage is to be taken out, both tenants must agree to do it.
The other option is Tenants in Common, which by contrast does not require equal ownership of the property.
This agreement, which can actually be entered into by up to four people (such as when family members purchase an investment property), may be suitable in situations when one partner earns considerably more than the other.
It also means that the parties to the agreement own the property in specified shares.
Upon sale of the property, Tenants in Common are entitled to the proceeds of their share, less any transaction costs.
In the event of the death of a party to a Tenants in Common agreement, their share goes to that person’s estate and not to the surviving partner.
Home buying is a complicated process, inside or outside of a relationship. But the sooner you hire a solicitor to help walk you through your options, the better.
You’ll at least need them for drawing up all relevant contracts, the ownership agreement, and the trust deed.
By now, you’ve realised that buying a home as a couple means preparing for all sorts of unpleasant eventualities.
Life insurance is especially important because of the large amount of money involved in home ownership.
After all, if one of you becomes ill, unemployed, or dies, the other will still be on the hook for the mortgage repayments. Life insurance is designed to help handle such extenuating circumstances.
After all, aren’t we supposed to hope for the best but plan for the worst?
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