Buying a home with your partner? Here’s what to make agreements about first

When you buy a house, there’s a lot to consider. You and your partner need to decide whether you’re buying the home together, or whether just one of you is buying it. If you’re buying it together, you can own it 50:50, or you might decide to split it another way.

You’ll also need to think about how much of your own capital you’ll be using and how much you’ll borrow. If you’ll be using your own capital, which partner does that belong to? Is it shared capital or is it your own personal capital? And in the latter case, how will that affect things?

If you’ll be taking out a loan as a couple, there are still lots of questions to answer. For instance, will you be borrowing from the bank or from family? Will you both be equally responsible for the loan? And how will you repay the loan – all in one go at the end of the term, with an endowment insurance payout for example, or in monthly instalments? In either case, the question arises as to where the premiums or repayments come from: a joint account or separate ones?

And then there are other matters like paying interest, tax deduction on the interest, and increases or decreases in the value of the property.

When buying a house, the focus is often first on finding the right place. Then it’s about whether you can afford it, and last but not least decorating your new home. While that’s understandable, it’s important not to forget about the financial decisions you need to make. If you separate, you might end up arguing over what happens to the property. This might even have to be settled in court.

Fortunately, almost every conceivable situation can be found in case law. For instance, situations where the property is in one partner’s name and the mortgage is in both partners’ names, or vice versa. Or where the endowment insurance is held in one partner’s name, but the premiums are paid out of the other partner’s income.

Another common situation is when one of the partners already owns a home and the other partner moves in – even on trial basis. Again, the pitfall here is forgetting to make firm agreements beforehand. This can cause friction if the partner who has moved in spends a lot of time renovating the house.

Is that partner entitled to some of the equity this creates? This could get even more complicated if the mortgage interest and repayments come out of the joint account, which that same partner pays into.

What if one of you receives money as a gift that is used to purchase a home or pay off a joint mortgage?

In a nutshell, make sure you have made firm agreements that work for you both when it comes to the financial consequences of buying a house together or moving in with your partner. Some of these agreements can be set out in a prenuptial or cohabitation agreement. Other arrangements can be made on top of that.

The most important thing is that you make conscious choices. The key question is: what financial consequences will buying a property or living together have for us? And what should happen if we separate ten years down the line, for example?