There are many positives as well as negatives to purchasing a property with your partner. Here are the top things you need to be aware of if you and your partner are wanting to purchase a property together.
One of the great positives to purchasing property together is that it gives you the advantage of increasing your borrowing power when applying for a home loan. What this means, is that you can borrow more than you otherwise would be able to if applying on your own.
Quite simply, borrowing with a partner allows you to split the costs of homeownership. Despite this clear advantage, there are still some things you need to consider carefully before purchasing.
Plan the Division of Costs
Both of you need to have a clear understanding of the costs involved, and a strategy on how you plan to split these expenses. You will need to have a budget allocated in order to be prepared for the financial responsibilities of a property loan.
We advise sitting down with your accountant, prior to purchasing. You may wish to consider setting up a joint bank account. Or, applying for a loan with a linked offset account. You need to decide who will be responsible for the management of this account.
What are your goals?
You need to consider your goals for today, tomorrow as well as in the future. Your needs now may not be the same in the future as you and your family grow. These need to be taken into account when searching for a property to purchase.
You also need to decide if your purchasing for a long-term or short-term investment, or as a family home to grow into. All of these will make a big impact on the location and type of property that you purchase.
Top 10 Things to Answer Before Purchasing a Property Together
- How much can you both afford to borrow?
- Do you both have a good credit history?
- What is your strategy (positive/negative gearing, capital gain, etc.)?
- Is it an investment or owner-occupied property?
- If it is an investment property, how will the profits or losses be divided?
- Have you done your research and due diligence about your potential property?
- Do you understand the upfront costs involved and can you meet them?
- Are you eligible for the First Home Owners Grant?
- Have you compared loans and decided what type of loan you want?
- Are you both in sync about what you want, what costs are involved and who will manage what?
Plan an Exit Strategy
When investing money together in order to purchase a property, it’s important that you have a scenario in place to protect yourself from future changes, such as:
- Death, serious illness or disability.
- Change in employment or income.
- Separation or break of relationship.
- Bankruptcy or property market changes that force you to sell at a loss.
The most important thing to consider before purchasing property together is to ensure that you are both on the same page on the purpose and goals of your property.