Couples who are buying a home together need to be just as much in tune when it comes to finances as they are regarding the area they prefer and the type of property they want.
This is according to Richard Gray, CEO of Harcourts Real Estate, who says although many more people are buying solo these days, about 75% of home sales are still being made to couples, and they really do need to agree upfront about how much they can afford and how they plan to finance and pay off their purchase.
“For most people, buying a home is still the single biggest investment they will ever make, and if you are planning to do this with a spouse or a partner, you should also know everything about each other’s financial situation, including how much you actually earn and how much of that is actually left after you have met all your existing financial obligations.”
He says if you are still paying off old debt like a student loan, for example, it’s much better to let your spouse or partner know this, as you’ll both probably have to wait a while longer before you can go house hunting or incur any more debt.
“Also, if one of you has had any money trouble in the past, such as a judgment for bad debt, bankruptcy or a home repossession, it could negatively affect your joint ability to obtain a home loan,” he says.
“It is much better to disclose this upfront than for your partner to find out only after your joint loan application is declined.”
He says the next thing for couples to agree on is how much they can realistically afford to spend on their new home.
“And again, that conversation should take place long before they begin looking at properties, for the simple reason that different people have different spending and saving habits and different approaches to obtaining credit and budgeting,” says Gray.
“If you have a joint pre-approval from a lender, one partner might be comfortable with buying right up to the limit of that pre-approval, while the other might prefer a more conservative approach. One partner might be good at saving and sticking to a monthly budget, and the other happy to live from pay cheque to pay cheque.”
If you don’t want to risk an argument every month, he says you need to be in accordance concerning various financial decisions before you buy a home.
Gray gives a few issues couples should discuss and agree on before buying a home:
- Whether you want to pay an additional amount off your bond each month, so you can own your home sooner.
- How much you should put aside for regular maintenance.
- What you will do if interest rates go up.
- What you will do if one of you loses their job or has to stop working.
Gray says you should also decide how you plan to share or split the responsibility for cleaning and maintaining your property, or whether you will need help and who will pay for that help.
“And although no-one wants to think about breaking up, we always suggest that couples who are not legally married draw up a proper partnership agreement at the time of purchase that provides for the sale of the property and the division of the proceeds in that event,” he says.
“This can help them avoid long and unpleasant legal battles during what is already a difficult time, and it is always better to be safe than sorry.”