So you’re in a great relationship, you think you’ve found the one, and now you’re looking to buy a house with that special person. You’re getting a kick out of day-dreaming about what your home together will be like. Perhaps fantasising about picking out paints, and splashing a little over each other’s faces playfully while decorating together on a Saturday morning in your overalls. Will you go with Atlantic Blue or Lemon Punch in the bedroom?
Obviously you’re going to have your friends round all of the time, and perhaps one day you’ll get a puppy too. All this sounds wonderful - and of course it is. But remember, buying a house together isn’t just a romantic decision, it’s also a financial one.
And so in amongst all that exciting dreaming and playful banter, it’s important to create some space to have a serious conversation about how you’ll manage this. Sorry to be that person, but you never know, you might thank me later. Getting things agreed in writing now can save a lot of heartache further down the road.
Beyond colour palettes, here are four things to discuss with your partner when buying a house.
4 things to discuss with your boyfriend or girlfriend when buying a house in the UK
1. How will you own the property
One of the biggest decisions you’ll need to make when buying a house together is how you will own it. The two options are as ‘joint tenants’ or as ‘tenants in common’. Let’s look at the differences between the two.
As joint tenants, the two of you own the house equally 50/50. If one of you dies then the property, and the mortgage on it, automatically get transferred to the surviving owner. They will then be responsible for making the mortgage payments. (This is why it’s also important to consider whether you need to take out a life insurance policy to protect one another financially were such an event to occur.) Secondly, as joint tenants you either both pay in cash, or both take out a mortgage - and are both responsible for paying that mortgage back. This is why it’s commonly married couples or those in civil partnerships who tend to buy a house as joint tenants.
The other option is to own the property as tenants in common. As tenants in common you can own different shares in the property. So if you or your partner are paying more towards the deposit or paying a higher share of the mortgage repayments, - and you want that to be reflected in your ownership of the property - then you’ll want to pick this option. Of course, this will have to be agreed in writing and with your solicitor when you purchase the house.
As tenants in common, each owner can act independently of the other, and may choose to leave their share of the property to whoever they like in their will. Meaning it won’t automatically go to the surviving owner. Further even were you to legally state that your partner is who your share of the property should pass on to in the event of your death, they may have to pay inheritance tax on that share unless you are married or in a civil partnership.
Whether buying as tenants in common, or as joint tenants, you are jointly liable for mortgage debt. So if you miss a payment because one or both of you were unable to contribute, it will negatively impact both your credit histories. And further by taking out a mortgage together you will be financially linked in your credit reports. Therefore if your partner has a good credit score, this will positively impact your creditworthiness in the eyes of lenders, whereas the reverse is true if not.
It’s wise to ask your solicitor to advise you if you’re not sure about what the best choice is for you. And of course things change, you may at a later date choose to get married, or have children - and if you do, you may want to revise how you own the property together and your agreements at that point.
2. What is your plan for getting on the property ladder?
Buying your first home is one of the hardest financial goals you’ll ever work towards. And if you’re taking this step together with your boyfriend or girlfriend, then it’s important to do it as a team from the beginning.
To get started, there are a bunch of decisions you two will need to make.
We’ve already considered the question of how you’ll own the property together, but there are many more things to decide. What kind of property are you hoping to buy? Where do you want to live? How much will that cost? What kind of mortgages will you be eligible for? Do you need to improve your credit histories first (if you do find out how Loqbox can help)? How much do you need to save for a deposit? How long will that take to save that amount? How will you save it? What type of mortgage will you get (fixed rate, variable, interest only)? As you can see there are a lot of things to think about here and you need to agree them together.
3. What happens if you break up?
Now that you’ve taken this massive decision to buy a house together, breaking up is likely the last thing on your mind. But unfortunately, it is something that you’ll need to consider when entering into such a big financial arrangement. You might want to put together a cohabitation agreement which spells out what happens in the event that you two decide to end the relationship.
4. How will you split costs and manage money?
If you’ve already lived together in rented accommodation for a while then you’ll likely already have established a way of managing finances together in your household. Whether that’s with a joint account, or splitting the bills evenly between you and then working out who is owed what at the end of the month - if it’s already working for you then look to continue that practice in your new home.
There are extra costs involved however in owning a property. Costs like home insurance, and ongoing maintenance costs that you’ll perhaps need to save for. For instance what happens if you need to replace the boiler in a couple of years, or get the roof redone? Both of these cost thousands of pounds, so it’s best to plan for these things financially together, and from the beginning.
Finally, a question on your mind might be: When’s the best time to have this conversation? Well there’s no time like the present. Good luck with having the conversation, and of course, also with your house hunt!