Buying a house with your partner
Buying a house on your own is exciting but buying a home with your partner is an entirely different situation. When buying solo, you only have yourself to consider – throw a partner into the mix and you have two lots of competing opinions.
From joint bank accounts to deposits, house location and style, taking this next big step in your relationship is a big decision. Here are some things to discuss when it comes to buying a house with your partner.
Are you ready to take this step in your relationship?
No doubt you’ve spoken about this at length, but buying a house isn’t a decision to make lightly. Before you speak with your partner and decide to spend your hard-earned money, think of the three ‘Cs’.
Circumstance
Assessing your ‘why’ before buying a house can be an important factor when buying with your partner. Are you only considering buying a house because your lease is up in a few months? Or are you living alone and want to share costs? Make sure your reasoning is sound before making this financial commitment with another person.
Communication
Communication is key in successful homeownership (besides finances, of course!). If your partner doesn’t like talking about their finances or seems to be hiding things from you, proceed with caution. Make sure you know if they’re harbouring any debt that could get you in trouble in the long run, as well as any other negative financial habits they may have.
Commitment
It’s one small word but has a very important meaning. On average, mortgages in Australia vary between 10-30 years, with 30 being the most common. This level of commitment may feel scary for some – even those who have been with their partners a long time. Ask yourself where you think your relationship will be in 10, 20, or 30 years. If you’re feeling unsure, trust your gut. It doesn’t hurt to wait a little while until you’re 100 per cent ready.
How will you manage your finances?
Once you’ve crossed off the three ‘Cs’, it’s time to look at your financial situation. It’s rare that each party will have the same amount of savings and the same annual salary. Because of this, finances must be discussed in detail before purchasing a house. Questions you need to ask include:
- Will living expenses such as mortgage repayments, electricity bills and groceries be split 50/50? Or will you split expenses by a percentage of each of your wages, making it more fair and equitable for someone who earns less than their partner?
- Are you going to combine money into a joint bank account or keep finances separate?
- If you need to buy furniture, where will this money come from?
- Do you have savings set aside in case of an emergency?
- Are you both working in stable jobs?
Many of these are common concerns among couples. Some things to keep in mind when discussing these questions are:
Joint ownership vs tenants in common
When deciding on what type of ownership will go on your paperwork, understanding each one is a great place to start. There are two different types of ownership – joint ownership and tenants in common. “Joint tenants” means that the registered proprietors – and there can be more than two – own the property jointly. If one of these owners were to pass away, the property automatically transfers to the other person/people in the ownership agreement.
“Tenants in common” means that each registered proprietor owns a share in the property. This share could be 50/50 or 60/40 or any combination, provided that the shares add up to 100% ownership. Tenants in common work well for couples who have contributed different deposit amounts and wish this to be reflected in their ownership. In this agreement, if someone were to pass away, ownership would be transferred to a person nominated by the deceased.
Shared bank account dos and don’ts
Combining your finances is all about trust – who’s to say your partner won’t clear out your bank account and leave in the middle of the night? While this is a very extreme scenario, shared bank accounts should be discussed thoroughly before opening.
Benefits of a joint account include:
- An easier way to pay joint expenses such as mortgage repayments and bills
- Fewer bank fees due to one consolidated account
- Both of you can see where your money is going
Risks of a joint account include:
- Having shared access to money
- Sharing joint responsibility for any debt
- Lack of privacy
The type of loan for you
Fixed, variable and split loans are all types of loans on offer when you purchase your home. Each of these has its own unique set of advantages and disadvantages, including the option to make extra repayments, having access to a redraw facility and fixed and variable interest rates.
Are there certain dealbreakers for each of you?
Many couples discuss why they’re moving out and how they’re going to manage the finances, but when it comes to buying the property, some unexpected roadblocks can present themselves.
Talking with your partner about what each of your dealbreakers are in a place can save you stress in the long run. This includes agreeing on things like:
- What suburbs are you happy to buy in?
- Do you have backup suburbs that may be more realistic?
- What’s your maximum spend limit? (Just because you can borrow a certain amount, doesn’t mean you have to use it all!)
- Are you happy with a house that may need a bit of work, or would you like something newer?
- Will you be paying for a building and pest inspection on every house you put an offer on?
- Is this house a long-term place (where you might want to raise a family) or are you planning on upgrading after a few years?
- Are you both comfortable with the amenities around the house (shopping centres, schools, public transport)?
Sometimes, these things aren’t considered until after moving in and can be a problem for couples later.
Buying a house with your partner is an exciting time. Choosing which place is right for you comes down to a lot more than just the overall ‘look’ of the house. Pre-planning is also required to ensure you’re ready to live together and take on the responsibility of owning a home. If you and your partner are considering taking the next step, get in touch with an Inovayt financial advisor today.
