This article was originally published in Tatler’s Address Book and can be found here.
Buying a home with your partner is a memorable step and the following tips will help you to future-proof your plans together so that co-owning your property is as stress-free as possible. Different considerations apply to married couples; this column is relevant to those who are not married.
Agree how you will contribute to the purchase price
When you start house-hunting, have an open conversation about your budget and how you’ll finance the purchase. Will you contribute equal or different amounts? Will you need a gift or a loan from a family member, or take out a joint mortgage? Answer these questions early on, before you’re under pressure to make an offer on your ideal home. Check your lender’s requirements and bear in mind that if a third party (such as a parent) contributes to the mortgage, your bank may only lend if their contribution is intended as a gift.
Liability for a mortgage and dealing with household costs
If there is a mortgage you and your partner will both have to sign up to it, and you will both be legally responsible for it all. In reality, the financially stronger of you might pay the instalments, but if the relationship ends, you’ll both still be legally responsible for all of an outstanding mortgage. Discuss in advance how you will meet costs such as ground rent, service charge, utilities, cleaning, gardening, repairs and refurbishment. Will you buy furniture, white goods and art jointly or separately? Some couples prefer to make these decisions informally but it’s advisable to put what you’ve agreed in writing, so that everything is clear and certain. You may also want to set up a specific “housekeeping account” to meet expenses, and to which you might both contribute your proportions in advance every month.
Sharing the value in a fluctuating market
The fairest way to own the property may be to each hold a proportion of its value. A property’s value is never fixed and depends on the strength of the market. Many couples agree proportions which reflect their purchase contributions and/or contributions to mortgage repayments.
Document how you own the property and what you have agreed about living together
Using a legal document called a ‘declaration of trust and co-ownership agreement’ is recommended whenever legal joint owners agree to hold specific shares of the property, to ensure there is one clear record of the agreement. Without such an agreement, a long and costly legal dispute could arise about the shares in which you own the property as the law in this area is complex, and the end result may not be as you anticipated. The document would state your beneficial interests i.e. your agreed percentage shares. It can also explain how the property would be valued if one party wants to buy the other out. You should create the document at the time of buying the property (although you can revise it in future).
A cohabitation agreement is a different animal; and it sets out living and financial arrangements and what would happen if you stopped living together. It can also cover details such as how a mortgage is to be paid off and how personal items are owned. Where a couple’s joint and individual assets are high value and complex, such an agreement will clarify their positions.
Communicating openly at every stage of ownership is crucial and discussing your arrangements with your legal advisers will ensure you can put the most suitable documents in place to best support your relationship as property co-owners and as a couple.