Is buying a house together before marriage a good idea?

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Published on Friday, 17 May 2019 16:20

Last Updated on 17 May 2019

Monica Costa

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At one stage, the most significant commitment young couples looked at was a shiny engagement ring. However, it’s now more common for couples to be racing into the world of mortgages and owning a house together – sometimes years before settling down into marriage.

There are plenty of reasons for this sudden rush into buying a house together out of wedlock. The rising rental costs is a key one, as well as the rise in low rate mortgages and help to buy schemes.

However, a lot of financial planners advise against it. In today’s article, we’re exploring the pros and cons of buying a house together before getting married.

If buying a house with your partner before getting hitched is on the cards for you, spend a little time looking at the advice below before getting into a potentially messy situation.

Assess each of your credit scores

It’s essential to be open and honest about your incomings, salaries and savings when in a couple and buying a home. But this is just one piece of the puzzle. Another aspect to explore is the credit rating and credit history each of you.

Buying a house together is like going into a business deal – couples should know the creditworthiness of their partner. Whatever your credit score looks like, this will impact your ability to be approved for a mortgage and determine what interest rates you will pay.

If one of you has a poor score, this could influence who takes responsibility for the mortgage loan and the title of the property. Couples who are not married are classed as individuals getting a mortgage, so if one is in a worse credit situation that the other, this will be flagged.

Opt for a joint bank account

Up to this point, you will possibly be in control of your bank accounts only. However, when buying a house with a partner and both having the mortgage together, you need to be able to trust that the other one is contributing and paying their way.

Joint bank accounts are usually associated with those who are married. They become ‘a pot’ for all joint incomes; however, when a divorce does happen, this can create some problems about who is entitled to what. The ideal situation is an undefended divorce, which can run smoothly and everything can be split.

A joint bank account is also advised for couples who are not married, especially for paying the mortgage, insurance, bills, taxes, insurance, and house maintenance. If you both set up Direct Debits into the account from both individual bank accounts, neither can forget to pay into it each month. Doing things this way keeps everything equal and fair, and much easier to track.

Put your agreement in writing

It’s advised to use a lawyer to prepare a written document when you look at having a mortgage together. It needs to clearly outline the full details of the arrangement between yourselves, as there will be a percentage of the home’s equity which each of you will be entitled to. And this depends on what each of you contributed when paying the deposit, or the agreed mortgage balance. Plus, it’s a smart move to have in writing what will happen to the property if a break up happened.

It’s not what you want to think about, but it’s fairly common and needs considering.

 

The bottom line is that when you enter this agreement with your partner, you need to have a solid picture of each other’s finances and credit rating score. A written contract is the wisest move you can make, outlining everything from the percentage split of the deposit, to the future of the property and the mortgage should the relationship come to an end.