These days, most couples live together before they get married.
Australian Bureau of Statistics data indicates more than 79% of couples who married in 2014 lived together first, a 3% increase in just 12 months. Buying a house with a partner without getting married is a very common thing. But the process for applying for a home loan with a de facto partner has some subtle differences.
It helps to know what you options are to save you time, money and additional stress should your personal circumstances change.
When applying for home loan finance with your de facto partner, one of the first questions you will be asked is what kind of tenancy agreement do you wish to take out?
Your primary options are:
1. Joint tenants
2. Tenants in common
Your answer will depend on many factors, including how you plan to share the costs and responsibilities of homeownership. You may also be asked if you would like to apply using both of your names, or just one. Again, there are pros and cons for each and we can help you identify the best option based on your goals.
Joint tenants vs. tenants in common – what’s the difference?
Joint tenancy means that you both own the property together equally. If you both decide to sell, the property must be sold as a whole. Your partner will automatically gain ownership of the property if you were to pass away suddenly, without the need for a will.
The alternative solution is tenants in common agreement. Under this arrangement, you will both own a share of the property, which you can sell off if you wish to leave the relationship. The property can be shared equally or you can own an individual share based on the percentage you invested.
Your partner does not automatically gain ownership of your share if something were to happen to you – it will depend on what is written in your will.
If you want to keep your share in the property separate from your partner, tenants in common arrangement may be worth considering. You can always make the switch to a joint tenancy agreement in the future.
When working out who pays what, it’s not just the home loan repayments that you need to consider. Stamp duty, maintenance, legal and valuation fees are just some of the costs associated with owning a property.
Talk to your partner about how to manage these costs: you may want to consider drafting a budget and setting up a joint bank account for you to both deposit a certain amount each week.
What could go wrong?
No one wants to think about their relationship ending but an important part of property ownership is being prepared. Discuss with your partner what would happen in situations like a breakup, sudden job loss or serious illness.
To chat about home loan options for you and your de facto partner, chat to WhiteStar Finance. Our mortgage brokers can help you find a home loan solution, even if your credit isn’t the best. Call us on 1300 652 842 or send us a message and we’ll get back to you.