What You Need to Know Before Buying Your First Home with Your Partner
The majority of first-time home-buying couples aren't quite ready to tie the knot. Buying a property with a significant other is an exciting milestone, but it also calls for careful deliberation. After all, if you and your partner decide to buy a home together without buying legal precautions, one of you could wind up with nothing if the relationship ends.
Lay Your Cards On The Table
Buying a property with a partner requires honesty and open communication. That is to say, it is now time for total candor. Despite the fact that being open and honest with one another is essential to maintaining a strong relationship, many partners avoid talking about money.
However, honesty and openness about financial situations are essential when committing to buying a property with a partner. If you and your partner have a solid foundation in your relationship, it will be much easier to get a loan from the bank or mortgage advice from a professional.
Think About the Money Aspects
You and your significant other have undoubtedly discussed the financial ramifications of buying a property together. Whether you're trying to figure out your monthly mortgage payment or your monthly savings goal, proper financial planning is essential.
When buying a home with a spouse, many do not realize how much their partner's financial situation can affect their own. That's why it's important to think carefully before committing to anything financially with someone who has a low credit score. The cost of the mortgage on a home purchase like this could be dramatically increased if just one of the buyers had a low credit score.
"Buying or selling your house is not just one of the biggest financial commitments you are ever likely to make," says Andrew & Andrew Solicitors. It is always a good idea for couples to think about the costs involved in a major commitment like this before diving in headfirst. Taking this step now could save you time and money down the road.
Put together a Declaration of Trust
A declaration of trust, for those who are unfamiliar with the term, is a binding legal document that specifies the financial arrangement between the buyers and sellers of real property. Even if you're head over heels in love and don't think you need a declaration of trust, it's important to have one in place so that you're both protected in the event of a breakup.
Help and Advice states, "Property purchases are large financial commitments, so you naturally want assurances about the value of the investment you're making." As an added bonus, having a plan in place for if one of you wants to sell your share or the property is sold will help you and your buying partner avoid future disagreements.
The amount of money invested by each party, the distribution of proceeds in the event of a split, and the ownership percentages of the property can all be specified in a declaration of trust.
Distributing Ownership Concerns
The expected division of property is an essential topic to consider. A new couch and whether or not you have room for a dining table pale in comparison to this. The distribution of property ownership is an important topic to address with your partner because of the fact that people have varied perspectives on money. Let's compare the two most common methods of subdivision.
The term "joint ownership" speaks for itself; it means that you and another person each have an equal stake in the property, regardless of how much money was first put down. Many couples choose joint ownership because it simplifies everything, especially in the event of a divorce.
Some people believe that a Tenants in Common agreement is more equitable than a Landlord-Tenant one. To determine how you and your partner will divide the property's equity, "Tenants in Common" law looks at how much money each of you put down on the acquisition. This can be a useful approach because it guarantees that you will each have an equal stake in the property. If you and your partner aren't sure how to divide up the ownership of your business, a lawyer or financial planner can help you figure out the best option.
Draft a property agreement
Writing down your goals and objectives can often help you achieve them. Before going into the purchase of a property as a couple, it can be a good idea to take the time to put your expectations about ownership and maintenance of the property down on paper.
A property agreement, sometimes known as a "cohabitation property agreement," allows you and your cohabitant(s) to set down the terms and conditions under which your property will be shared in the event that your relationship should end. The following are examples of what should be included in a property agreement:
- Individual property ownership as a percentage
- The Purchase Contract
- Which party takes on the financial burden if the other fails to make payments?
- Possession status of the real property
- A Look at the Dispute Resolution Procedure
- A plan for getting out of there quickly if things start to go south.
If you and your partner are not married and plan to buy property together, a written agreement outlining your expectations is a good first step.
Buying a first home with a significant other is an exciting milestone. Even though you shouldn't plan for the worst, thinking about the things I've listed above will help you make a more informed decision about your finances.