Cohabiting? What you need to know when buying together (Part One)
Buying your first property with your partner is a fantastic time, and hopefully the start of a long and happy journey together. But if you’re buying with a partner and will be co-habiting, rather than getting married or entering into a civil partnership, then it’s worth making sure that both of you are legally protected from the get-go to make sure you’re both financially secure.
That’s because the law currently doesn’t recognise the status of a ‘common law’ husband or wife, so your rights around property ownership are different to those of a married couple. The notion of a ‘common law’ spouse is a common misconception; with many people thinking that both parties acquire a right to the other’s possessions and income provided they’ve lived together for a certain amount of time. But that’s not the case. For couples who aren’t married and don’t have children, then neither has any automatic right over the other’s assets.
So, when it comes to buying a property together if you’re cohabiting, what are the main things to consider?
It probably helps at this point to remember that when a property is purchased by two people, they have a choice as to how they legally own the property. There are two options here. The first is as Joint Tenants, which is the default position, and means that any capital in the property would be split on a fifty-fifty basis in the event the property is sold, regardless of who contributed what amount towards the purchase. Now, if you’re both putting the same amount of money in, this may be fine. But if one of you is contributing more than the other, you may want instead to own the property as Tenants in Common. This means that you’re both named on the deeds still, but crucially each partners’ share of the property is noted.
It’s also worth considering that if you’re taking out a joint mortgage, you will be what are called ‘jointly and severally liable’ for the monthly mortgage payment. In plain English, this means that if one of you can’t pay their half or contribution, then the other party has to pay the whole amount of the monthly mortgage payment in order to avoid mortgage arrears. A lot of people don’t understand this concept and then get themselves into issues with their lenders, as they mistakenly believe that so long as they pay ‘their half’ of a joint mortgage, all will be fine. But that’s not the case. Going into a joint mortgage with your eyes wide open and understanding that if your partner lost their job or became ill and were unable to make their contribution towards the mortgage, you would have to make up the difference.
Of course, talking about the legalities of who owns what share in your home together before you’ve moved in doesn’t exactly sound like a romantic notion, particularly when there are far more exciting things to talk about and plan for, such as what furniture you want to buy or how you’d like to decorate your new pad. But in some ways, it shows your partner how much you care for them and that you’re committed to ensuring that they will always be protected financially.
And what could be more caring than that?
In Part Two, we look at why it’s so important to consider making a Will and also how the right insurance policy can help to ensure your partner’s financial security if the worst happens.