Couples split home loans, experts lean


Buying a house together is one of the most important things a couple will take in their relationship, and possibly the most expensive. So when it comes time to put down a down payment, follow up on mortgage payments, repairs, bills, etc. the question becomes: “who pays for what?” Photo: Mark Stewart

Buying a house together is one of the most important things a couple will take in their relationship, and possibly the most expensive.

So when the time comes to put down a down payment, followed by mortgage payments, repairs, bills, etc., the question becomes, “who pays what?”

In many relationships, the parties will earn different salaries, which most of the time is a small problem. However, buying a house is a different ball game than sharing a restaurant meal or shouting movie tickets for your partner.

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According to mortgage experts – who often find themselves playing the role of relationship counselor – the first question couples should ask themselves is: “Do we even love each other?” “

A solid relationship foundation, including open lines of communication and at least an idea of ​​what that will look like in the next five to 10 years, is a great way to avoid future angst.

Mortgage Choice broker Deslie Taylor said it was surprising how many couples were willing to buy joint property when they couldn’t agree on the basics.

“Too often I see people and while I’m talking to them I’m like, ‘I don’t even know if you should do this. You can’t even decide what color of the sofa you want, is that really what you want to do? ‘ “

“So my advice is to make sure you love yourself. “

Couples should discuss their expectations for the future before entering the real estate market together
Couples should discuss their expectations for the future before entering the real estate market together

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For those who are truly prepared to take the plunge, the possibilities of buying a home are as diverse as the types of relationships and romantic entanglements that exist.

Ms Taylor says that these days most couples in the real estate market who do not have children are very financially independent, with many having separate bank accounts and perhaps then creating a pooled fund for them. the House.

“It could be the mortgage payments and the ongoing costs of maintaining the house, like utilities and so on to maintain the house. They will then pool that money, equally and fairly, ”Taylor said.

Even if the contributions are uneven, due to differences in wages or parental contributions, for example, the vast majority of couples will conclude the purchase of a property as joint tenants, which means that they each own a share. equal property.

“Most couples see their assets as common assets, so they each contribute what they can and aren’t too worried about an uneven contribution,” said Alan Hemmings, Managing Director of Home Loan Experts.

“You would expect them to see a long term commitment if they buy a house together. “

Most couples are referred to as “roommates,” meaning they own the asset equally, regardless of what they have personally contributed.
Most couples are referred to as “roommates,” meaning they own the asset equally, regardless of what they have personally contributed.

Become financially dependent

It may seem like a person paying more for a common asset might arouse resentment from that party, but the most common scenario is one who pays less feels guilty or inferior for not contributing so much.

“I find that when my clients are sitting across from me and they are having financial difficulties in the relationship, it is because one party feels they are financially dependent on the other,” he said. she declared.

This can happen when a partner stays home to take care of the children, for example, when they suddenly find themselves guessing about going out for coffee or asking their partner for money for shopping. lifestyle.

“If you are going to have a family together and all of a sudden the income is going to go down for a part, then at the end of the day you want that person to be able to raise these kids without feeling guilty that they can’t contribute at this time.” there, ”Ms. Taylor said.

A common problem is that one partner begins to feel financially dependent on the other, leading them to feel guilty about lifestyle purchases.
A common problem is that one partner begins to feel financially dependent on the other, leading them to feel guilty about lifestyle purchases.

“At this point, the discussions I have with clients are more about making sure that they are contributing enough that they don’t feel financially dependent on the other person.

“So if they earn about 25% of the income the other party earns, then do they put 25% of the commitment into that part?” “

This is also where the discussion of expectations for the future before buying a home is invaluable, so both parties can be on the same page and not end up in unfamiliar territory and feel helpless. to speak.

“I tell my clients when they buy: let’s not talk about what you want to do today, we have to talk about what you are going to be in five years, because at the end of the day that will determine the loan that I structure for you, ”Ms. Taylor said.

Most people will return to work after having children, after which they can start contributing again to the mortgage and other expenses such as childcare expenses, out of a genuine desire to do so.

Joint tenants

Of course, not all relationships are young professionals settling down to have children. Sometimes people can reunite after having had previous relationships and having children with separated people, and looking to buy a house together, but with added protection.

In the case of condominiums, Mr. Hemmings explained that when one party dies, the other inherits all of the assets.

It may not always be ideal when children and inheritances are on the line and the potential is there for people to hold onto the wealth.

Therefore, “if people want to have a different percentage of ownership, they have to buy as tenants in common,” Hemmings explained.

In the case of common tenants, the parties own a different part of a property and, in the event of death, can bequeath this part to whomever they wish.

For some couples, taking different shares of a house is the best option, known as “tenants in common”.
For some couples, taking different shares of a house is the best option, known as “tenants in common”.

He added: “If there is a gift from one of the parents, then it is better for it to be given to their child than to the couple. If they separate later, it can help ensure that their gift will not be shared between the couple.

If a couple purchases a property as an investment, tax is another big reason the asset would be anything other than a 50:50 split.

“Structurally, it makes more sense for a partner to have a higher percentage of ownership (typically lower income for a positive gear property and vice versa for a negative gear property),” Mr. Hemmings said.

Divorced

Once the plates start to fly and the couples finally decide to separate or file for a divorce, they will ideally find a way to amicably divide the asset in the middle.

But as Ms. Taylor said, “From what I see in my experience, it’s getting a bit of a nightmare.”

With things like child custody, courts will often ignore how much each party has contributed in favor of giving a larger share to the primary caregiver.

“It doesn’t matter what you’ve contributed and how much you’ve contributed. From a family perspective, what does it look like? Who will raise the children, who is the main breadwinner, who is not, ”Taylor said.

“That way, they won’t put the low-income person who has to raise the kids at a disadvantage. In most cases, that person will get a larger share of the share.

The terms of a home loan and the chances of success depend heavily on the relationship itself and the openness of members to discuss their needs and circumstances.

“It all comes down to communication and expectations,” Ms. Taylor said.

“And before you walk into a property, make sure you like yourself.”

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