It has become increasingly common for Australian couples to live together before getting married and many are making the decision to buy property with their partners without walking down the aisle. You might be having these conversations with your partner so if you’re thinking of making the commitment of buying a home together, there are a number of things you should consider first.
According to the Australian Institute of Family Studies, in 1970, there were 9.3 marriages per 1000 residents. In 2016, this number dropped to 4.9. Not only that, Aussies are getting married older. In 1971, the median age for men was 23.4 and for women, 21.1 while in 2016, the marrying age rose to 30.3 and 28.7 respectively.
You might be surprised to know that the law draws no distinction between de facto unions and marriages when it comes to property ownership. For this reason, it’s important to know that if you’re in a de facto relationship, you’ll still be making a significant financial commitment.
Chances are, if you’re living with your partner, you might have made a number of financial commitments together and may even share a bank account or investments. These smaller commitments are a good way to prepare yourselves for buying a home and taking out a loan together.
That being said, a home loan is a considerable financial decision and should not be entered into lightly as relationships can come to an end and there needs to be an exit strategy in place to protect yourself and the asset you have purchased with your partner.
What you need to know when buying a property with a partner:
If you’ve been living together for three months, lenders will consider you to be in a de facto relationship.
Many first home buyers enlist the help of a parent when purchasing their first home. You or your partner might be able to ask your parent to go guarantor on your home loan and help you with your deposit. However, should your relationship break down, this situation could cause tension along with financial risk for the parents involved, so it pays to run some 'what if...' scenarios before going down this path.
You’ll no doubt have to have some uncomfortable conversations with your partner detailing a plan for if the relationship should end. It’s important you seek legal advice as well to ensure you do not forget any important details.
Some things to consider:
- Will you evenly contribute to the deposit and loan repayments? Or will one of you be making a more significant contribution than the other? This will be an important consideration in the event of a split as you will need to know how to divide the proceeds of a sale.
- Exit strategy - If the relationship were to come to an end, would either of you be able to buy the other out?
- Ownership structure - This is very important, particularly if you owned a number of assets prior to meeting your partner. Or, if you inherited assets from a loved one. There are ownership structures in place that can protect those assets. The two most common ownership structures are: joint tenants or tenants in common. In a joint tenancy arrangement, if one of you were to die, the other would automatically inherit the property and the property split is 50/50. Tenants in common, however, do not have the ‘right of survivorship’ should one of the owners decease. If you’re buying a home with your partner and would like to split the ownership structure to reflect the assets you already own, this might be the option for you as you can have an ownership structure that is 60/40 or, 30/70, for example.
- Seek expert advice - Discuss these options with a legal professional to establish which is the most suitable for you.
If you’re ready to buy a home with your partner and want to discuss which options are available to you, speak to your local Mortgage Choice broker who can help you find an ownership structure and loan to suit your unique needs.