Buying a home with a partner is a big step, both emotionally and financially. It’s easy to get swept up in the excitement of finding your dream home, but there are legal aspects to consider that can protect both your interests and your future.
You’ll want to think ahead and be clear about your rights, responsibilities and expectations before committing to a joint mortgage on a property. It’s also a good idea to choose a reputable conveyancer to support you through the process.
Here are some of the key things to think about.
Joint tenants vs tenants in common
One of the first decisions you’ll need to make is how you own the home. There are two main options: joint tenancy or tenancy in common. The key difference lies in what happens if one of you passes away.
With joint tenancy, both of you own the entire property equally. If one of you dies, the other automatically inherits their share, regardless of what might be written in a will. This might seem straightforward, but it could be an issue if you want to make sure that your share of the property goes to someone else (like children from a previous relationship).
In contrast, tenants in common lets you own separate shares of the property. These can be equal or unequal, and if one of you dies, their share doesn’t automatically transfer to the surviving partner but instead passes according to their will. This structure might be useful if one of you has a larger financial contribution or if you want more control over your share after death.
Protecting investments with a Deed of Trust
If you and your partner are contributing different amounts to the property, a Deed of Trust is something worth considering. This document outlines your individual financial stakes in the home, ensuring you’re both protected if things don’t go as planned in the future.
For example, if one partner contributes a larger deposit or takes on a bigger share of the mortgage payments, the Deed of Trust can clearly state how the property will be divided in the event of a split or sale. This means that should your relationship end, there’s no ambiguity over who gets what. It’s often advisable to have a lawyer draw up the deed to make sure it’s legally sound.
Understanding financial liability
Buying a property together means you’re both financially tied to it. If one of you defaults on mortgage payments, the lender can hold both parties liable. That means the other partner may be required to cover the missed payments, even if they weren’t at fault.
This is why it’s crucial to be transparent with each other about your finances before committing to a property.
The importance of open, honest conversations
It’s not always the most comfortable conversation, but it’s important to be on the same page when it comes to finances and committing to buying a home.
What happens if one of you wants to move for a job or if you split up? Will you both want to sell the property, or will one partner stay in it? These are tough topics, but addressing them early on can help prevent future disputes.
Having these conversations can also prevent financial misunderstandings. For example, if you want to invest in renovations and your partner doesn’t, being clear on how costs and benefits are split will save a lot of hassle down the road.