ith more Australians delaying marriage until later in life, and four out of five married couples living together before tying the knot, buying a home with your partner can seem like a great way to get onto the property ladder.
Although the average age of first-home buyers has remained constant at 32 years old for two decades, the median age of marriage in 2015 was 31.8 for men and 29.8 for women, compared to 29.5 for men and 27.6 for women in 2005, according to data from the Australian Bureau of Statistics.
If you are already living with your partner, your finances will likely have already merged to some degree, and buying property together may have crossed your mind. After all, it’s easier to secure and service a home loan with two incomes rather than one.
How will you split costs?
Owning a home means coming up with a down payment and closing costs, covering property taxes and utilities, and paying repair and maintenance bills. Rarely can those financial responsibilities be split 50-50.
One person may have the savings for a heftier deposit. One may earn a higher regular salary and find it easier to make mortgage payments. One may be saddled with student debt or a low credit score. One may be skilled with tools and ready to do repairs around the house, raising the issue of whether in-kind contributions have a monetary value and what that value should be.
But if the contributions aren’t divided equally, should ownership of the home be divided equally?
Buying Property Together
Before you buy a house or other substantial asset jointly with someone else, decide how you will own the property. Doing so will protect your rights if your partner dies or the relationship ends. Basically, you need to decide whether you will own the property as joint tenants, or tenants-in-common.
Joint Tenants. Joint tenancy is a form of ownership in which ownership is shared equally. All joint tenants own equal interests in the jointly-owned property. When two or more persons expressly own property as joint tenants, and one owner dies, the remaining owner(s) automatically take over the share of the deceased person. This is termed the right of survivorship.
Tenants-in-Common. If you decide to hold the property as tenants-in-common, then each owner has a distinct share in the property. You decide the percentage of the share. For example, if one party contributes 25 percent to the purchase price, then the property share could reflect that percentage. Something to keep in mind is that unlike joint tenancy, if the co-owner dies, you do not have rights to their share of the property. Their share becomes part of their estate and will be distributed as determined by the person’s will or state intestacy laws.
Get it all in writing
So it might not be very cute and fuzzy, but at some point you’ll need to talk legalities with your partner. Especially if you’re planning on investing in a property. This can be tricky for unmarried couples, as there is no formal agreement in place – you’re just two separate clouds floating around in the sky of property. If one of those clouds bursts into rain, it’ll get everyone wet…
Get your lawyer to draft a clear agreement which sets out how the property will be divided up in the event of your potential separation. A contract like this signed by you both, will document what will become of the property in the event of a break up, or how one of you may receive X-amount in compensation if the other half would like to stay in the property.