Buying a property together is a major relationship milestone. Whether you’re looking to buy your first home, a holiday house or an investment property –if it’s a purchase you’re making with your partner, you need to be clear about what you both want and the steps you’ll both take to get there.
Here’s a guide to getting on the same page and taking the emotion out of purchasing a property together.
Clarify common goals
First you need to determine the purpose of buying the property. Do you want to live there? Do you want your family to grow up there? Will it serve as a weekend getaway? Or are you hoping it will help fund your future financial dreams?
Making the distinction –and agreeing on it –from the outset is important as it helps you decide what kind of property to buy, the size and type of loan you’ll apply for, and plan for the tax and budgeting implications of the purchase.
If you’re looking at the property as an investment, you may want to consider speaking to a financial adviser about whether property is a well-suited investment at this age and stage of life.
Determine how costs will be shared
Stamp duty, conveyancing and title transfer fees are just the tip of the iceberg when it comes to the costs associated with the purchase of a property. As time goes on there will inevitably be rates, maintenance and repair costs, insurances, maybe even renovations and body corporate fees.
These ongoing costs can add up, so be sure to put a plan in place regarding how you will share them from the outset. Your plan may involve opening a joint bank account or offset account.
There are two main ways you can own a property with your partner: tenancy in common or joint tenancy.
Tenancy in common essentially allows you to own a defined share of the property and, if you die, bequeath that share according to your will. Joint tenancy, on the other hand, means that if one owner dies, the surviving tenant takes ownership of the property.
Other ways to own a property include through a trust, self-managed super fund, or a company. It may be a good idea to seek legal, tax and financial advice on what structure is best for you and your situation.
It’s not particularly rosy or romantic thought, but when you’re heading into the purchase of a property with someone else it may be wise to have a lawyer draw up a co-ownership agreement. This agreement can set out who lives at the property, who is responsible for maintenance, what happens if one of you dies or becomes bankrupt, and how the property should be sold if one of you no longer wants your share.
In the case of an investment property or holiday home, the agreement can outline how rent is to be distributed, or when certain people can use the property.A co-ownership agreement can be particularly useful if you have different interests in the property or mortgage, however, it may not be binding in the event of a marriage or de-facto relationship breakdown if it’s not properly drawn up and made binding, so it is important to always consult a lawyer when setting up this type of agreement.
It’s important to note that if you take out a joint mortgage on the property you may be held liable for the entire debt.
For example, if you apply for a $500,000 loan together, but plan to split the repayment obligations 50/50, under the terms of the loan you may not only be responsible for your $250,000 share, but for the whole debt of $500,000. So if your partner defaults on their payments, loses their job, or becomes ill and cannot work, you could be stuck making up their share of the repayments. And vice versa.
As such, it’s important to seek legal and financial advice as to your mortgage repayment obligations, as well as your property ownership rights. It’s important then, that you both have a good safety net in place.
Income Protection Insurance, Total Permanent Disability Insurance, Critical Illness Insurance and Life Insurance covers are designed to help you and your partner meet your financial commitments in the event of the unexpected –an accident, illness or death.
A tailored insurance solution may not only help you pay the bills, it may allow you to get on with enjoying the life you and your partner had planned. So if you don’t already have insurance, and you’re looking to buy a property with your partner, reach out to us for help in assessing your personal situation and what life insurance may be relevant to you.
Looking at purchasing a property? Talk to the team at Sunlife about what’s right for you.
Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors