You may have decided that the only way to get on the property ladder is to buy with your partner. Together you can afford a bigger deposit and mortgage.
It certainly makes financial sense. But there are important points to consider.
How are you legally going to own the property? Will you both be contributing equally into the costs of buying and running it?
There are two ways to jointly own a property. Most married couples and civil partnerships buy a property as joint tenants. Here, in the event of the death of one owner, the remaining owner or owners receive the deceased’s share in the property automatically. If there is a sale during their joint lifetime, the net sale proceeds are held on an equal basis.
You can also own a property as joint tenants in common but the situation is substantially different to the one above. If one owner dies that owner’s share in the property does not pass automatically to the other owner but passes under the deceased’s will or under the laws on intestacy if the deceased did not make provision by way of will. In addition, tenants in common can hold their interests in the property in equal or unequal shares.
There might be times when a tenancy in common ownership is more suitable. It’s typically used when friends or relatives pool their resources and buy a property together. But it might be appropriate if one partner is putting up 75% of the deposit as the share of the property can be split accordingly.
This type of arrangement also means that each partner can leave their share to a beneficiary of their choosing in their will. It could be their partner but equally it could be a relative or someone else.
Another important thing to consider is if one of the partners is separated from, but still married to, a previous partner and/or has children. In this situation, it may be wise to wait until a financial settlement has been made.
Whichever way you own a property it is possible to take out a mortgage. However, if only one of the parties needs a mortgage, it will still need to be taken out in joint names. This is because joint owners are seen as one legal entity and for tenants in common, it is very difficult to find a mortgage lender who will lend to just one party.
As borrowers, you will be jointly and severally liable. This means that if one person stops paying the mortgage, the other person will be responsible for it.
It’s a good idea to discuss your long-term plans and what will happen if things go wrong. For example, if the relationship breaks down it’s better to discuss now when and how the property can be sold and how the proceeds of the sale will be divided up. This type of thing can be covered in a cohabitation agreement – a legal document that looks at the financial aspects of your relationship.
It’s an exciting time but there are also lots of things to think about and it’s important to get good legal guidance. For further help and advice, please call LPL on 0333 305 5249.
