Why more of us are buying our first home together before tying the knot.
It doesn’t sound very romantic, but more and more couples are choosing a mortgage over marriage, opting to buy their first home in order to delay or avoid the pressure of getting wed.
In fact, according to the Post Office Financial Services a third of us are taking the property plunge before walking down the aisle.
It’s certainly an alternative and practical way to show a strong commitment to each other, and for many couples, buying together is frankly the only way they will get onto the housing ladder.
Love, honour and repay
While one in three people say that they would buy a house with their partner to remove the pressure to get married, over half of people are willing to put the mortgage first. According to the Post Office 55% of people have either already bought together or would consider doing so before marriage.
What comes as no surprise is that there is a generational divide on the issue. Two-thirds of over-55s said that marriage is a greater commitment than buying a property with a partner, but only half of under-34s felt the same.
For these younger couples, buying with a partner may be the only way to get onto the property ladder, and 42% of 18 to 34 year olds cited this as the main reason they would buy with a partner before marriage.
It doesn’t quite pull on the heart strings like getting down on one knee and asking someone to spend the rest of their days with you, but it’s nothing if not practical.
However, don’t be fooled. Buying together is also a huge commitment and not something to enter into lightly, whether you decide to buy with a partner, family member or with a friend.
So what are the pros and cons of buying together?
Better buying power
Clearly the major advantage of buying together is that two incomes are better than one.
Nowadays most lenders do not work out what they will offer you based on strict multiples of your income, instead favouring an affordability calculation that looks at your incomings and outgoings. Nevertheless a couple is more likely to be able to afford greater monthly mortgage repayments, and therefore be able to borrow more.
Depending on whereabouts in the country you live, buying with a friend or partner may well be the only way you can make that first step onto the ladder.
For example in Greater London the average property price is currently £283,511, according to Nationwide, and most single borrowers simply don’t earn enough money to qualify for a mortgage anything like big enough to buy such an expensive property. To be honest many couples struggle too!
But, what about buying with more than one person? Is it possible to increase your purchasing power even further by getting a gang of friends together to get onto the housing ladder?
Well, yes and no.
A little help from your friends
While some lenders will allow more than two names to be put onto the mortgage, most will still only take into account two incomes (usually the biggest two).
But Britannia Building Society is one exception and will lend to up to four borrowers, taking all their salaries into account, offering a maximum of twice the combined gross income.
This can be really useful for some people, who would otherwise be unable to buy a house but there are many things to consider when buying with a partner or friends, and it is never something to be undertaken without thinking through every possible consequence.
Share and share alike?
When you buy with a partner, you will very often buy under a joint tenancy, unless you specify something different. Friends buying together can also have a joint tenancy.
This means that you are all individually and jointly liable for the mortgage. In other words, if your partner or friend is unable to pay their share you are legally required to pay it and will be chased for the money. Equally if your partner or friend dies, you assume full control and responsibility for the mortgage and property.
John Fitzsimons looks at the dos and don’ts of arranging a mortgage over the internet.
The other option is a tenancy-in-common where you each own a set portion of the property and pay that portion of the mortgage payments. This can be a good idea if you are all contributing different amounts as it can clearly spell out what portion of the property you each own.
If one party was to die, their portion would go to their estate rather than to the other tenants, although with a tenancy-in-common you are each still individually responsible for the full payment of the mortgage if one person is unable to pay their share.
In other words it’s essential you trust everyone you intend to buy with, because if they don’t pay up, you will have to.
Exit strategy
If you are buying with a partner you probably won’t want to talk about what will happen if you decide to go your separate ways, as it seems like a negative way to start out on your life and home together.
However, it is worth having a chat about how you would exit the property and mortgage if it came to it. You might want to draw up a contract if one of you has contributed a much greater portion of the deposit and the mortgage repayments for example.
If you buy with friends it’s absolutely essential that you have a written record, called a Deed of Trust, which spells out each person’s rights and responsibilities and has a clear exit plan in place.
After all, people meet new partners and get married or start families, while job changes can mean relocation for others.
It’s also important to realise that when you buy a property with a partner or friends your finances can become linked, so a bad mark on their credit record could show up on yours, hampering your ability to get a credit card for example.
Buying a property is arguably as big a commitment as marriage. It can certainly take longer and be more expensive to get out of if you make the wrong decision. So make sure that when you say ‘I do’ you really know what you are getting yourself into.
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