Purchasing a property with your partner is a big emotional and financial commitment, and it may feel like a particularly major step if you’ve previously owned a property with a partner and things didn’t work out.
If you know you’re able to afford the costs of buying a home together, chances are you’re already feeling pretty comfortable about sharing your living space with your partner, so taking the next step is likely to feel a positive move. However, it can also be a nerve-wracking one, especially if you’ve lived alone for a long time, or had a messy break up in the past.
Here, we look at some of the things you need to consider before buying a home with a partner, including how to go about finding the best mortgage deal and the different ways to structure your ownership of the property so that you are both protected financially.
Preparations before you buy
Owning a property together is different to paying rent every month. For most couples, taking out a joint mortgage is the biggest financial commitment they’ll make, not necessarily getting married.
So what should you think about before you say ‘I do’….to a joint mortgage? Your first step should be to make sure you have a large enough deposit when you pool your resources together. It may be that one or both of you are planning to sell existing properties to fund your purchase together, in which case you may have a sizeable deposit to put down. However, if you’ve both been renting, you may need to save for a while before you buy. Competition has increased in the mortgage market in the last six months or so and you may not always need a 40% deposit to get the best rates, but you’ll still need a deposit of around 30%.
Remember that you’ll also need to budget for the extras, such as mortgage arrangement fees, Stamp Duty, a survey, legal fees and removal costs. You should also talk about how much you want to spend after you’ve moved in. Are you the kind of person who prefers to save for home improvements, or are you happy to splash the cash and borrow on your credit card? This may feel like a relatively minor matter, but you don’t want one of you to feel resentful of the other for spending money they can’t afford.
If you’re using a mortgage broker you may also have to pay a fee or commission to them. Some brokers work on a fee-free basis, some charge a fee and others charge a percentage of the mortgage. You should be given this information when you receive your first email or letter from the broker or have your initial meeting.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Bear in mind that if you and your partner already have joint loans or accounts with a credit facility, your credit files will already be linked. It doesn’t mean that a prospective lender can see what’s on your partner’s files just by accessing yours (and vice versa), but they will be told that you are financially linked and have the right to check both parties’ files if they want to.
It’s worth checking both your credit scores before you apply, as the lower your scores, the harder you’ll find it to get a mortgage. There are three main credit scoring agencies in the UK – Experian, Equifax and TransUnion (formerly Callcredit). If you don’t want to pay to access your credit score, ClearScore offers a free credit checking service that accesses Equifax data.
Other options include MoneySuperMarket’s Credit Monitor tool, which enables you to check your credit score and report free of charge using data from TransUnion and offers free personalised tips to help it grow. Experian also has a free service that enables you to sign up and check your credit score with them and Totally Money offers a similar service using TransUnion data.
If your credit score is lower than you expected, there are ways you might be able to improve it. Find out more in our guide Seven steps to improve your credit score.
Protecting yourselves financially
Depending on your circumstances, you may be better off borrowing the money as a joint mortgage or just in one person’s name. For example, there are plenty of couples where one person earns significantly more than the other or where one has recently set up their own business and so doesn’t have enough of a track record to get a mortgage.
However, if the mortgage is in one person’s name but you will both be contributing to it, it’s a good idea to talk to your solicitor about setting up a Trust Deed which will specify if the ownership should be split equally or proportionally based on ongoing contributions in the event that you separate and the property is sold.
There are two main options as to how you structure your home ownership. These are as joint tenants or tenants in common:
Joint tenants – This means you jointly own the entire property rather than each owning a defined portion. If you and your partner split up, the ownership is split equally and if you decide to sell, the proceeds will be split 50:50. If one or both of you want to stay in the property and can’t come to an agreement, you may need to seek legal advice as you are both legally entitled to the property. If one of you dies, the surviving partner will automatically inherit the property.
Tenants in common – In this scenario, you each own a specific portion of the property, and this is what you will legally be entitled to if you split and sell up. However, things can get a little more complicated if the portions you each own have changed over time, and this isn’t legally documented. For example, you might initially have owned 25% of the property, but increased your equity over the years to 40%. As mentioned, it’s a good idea to get a Trust Deed drawn up as this shows exactly who owns what. If one of you were to die, the surviving partner will not automatically inherit the property unless it was left to them in their will.
Choosing the right mortgage
When assessing your mortgage application, most mortgage lenders work on the basis of affordability, which means they’ll look at how much you earn and how much you spend on things like debts (anything from credit cards to council tax and child maintenance). You can usually borrow for a house purchase well into your 50s and beyond, with various options these days for affordable mortgages that stretch into retirement. However, bear in mind that different lenders apply different criteria, and mortgage age limits. Find out more in our article Mortgages for over 50s: What you need to know.
There are hundreds of different types of mortgages available, so if you’re not sure which deal is right for you, it’s worth seeing professional advice. As a general rule, however, If you’re concerned about unexpected mortgage rate rises in future, you may want to opt for the security of a fixed rate (although they are usually a bit more expensive than tracker or discount rate mortgages).
If you think interest rates are likely to fall over the next couple of years, you might prefer to go for a tracker rate, which as the name suggests, tracks the Bank of England base rate plus a set percentage. This means that when rates fall, you’ll benefit immediately from lower payments, but the reverse is also true, so when rates increase, your monthly payments will also rise. You can learn more about the various mortgage types in our guide Different types of mortgages explained.
Once you’ve thought about which kind of mortgage you want, you’ll need to consider how quickly you plan to repay the mortgage. Even if you want to pay your mortgage off quickly, it’s worth considering whether you might be better off opting for a longer term and making overpayments rather than being tied into paying it off at a level that may become unaffordable if your circumstances change.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
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