We put every effort into ensuring information on Finder is accurate. This article was reviewed by James Millard from our Editorial Review Board as part of our fact checking process.
Borrowing with a partner allows you to split the costs of homeownership, but there are some risks to be aware of, and choices you need to make from the outset to ensure that you manage your finances correctly.
Property ownership comes with several associated costs so it's important that you lay down the ground rules about how you will split the expenses. From mortgage application fees to stamp duty to repairs and maintenance, you'll need to have an allocated budget in place to prepare for your financial responsibilities.
First up, you need to make sure you understand your cash flow and budget, and ask for advice about how you can manage the costs with your home buying partner.
You may want to consider setting up a joint bank account with sufficient funds to cover your mortgage and property expenses. This may involve both you and your partner depositing a certain amount into the account each week.
Also if you apply for a loan with a linked offset account, consider who will be responsible for managing this account and making additional repayments towards the loan? If one partner can't make their payment one month, what is the back-up plan?
The fact is that although you may have your eyes set on a particular type of house at this time, your needs change as your family grows.
This means you may need additional space both indoors and outside and may find certain amenities are more desirable, such as proximity to the beach, the city or other relatives with children.
All these things need to be taken into account before even planning on buying a new home, since without careful consideration, you might move out after a couple of years and find a new property.
Moving will bring with it the stress of putting a property on the market, paying agent fees and having to pay stamp duties and removal costs once a new property is found. It may also include the need to take out a new loan if your loan isn't portable, meaning you'll pay establishment costs and other fees once again.
Financing a new property purchase like this will also require a great deal of research and a careful account of your budget, credit rating and debts.
Here are some things you may want to consider before joining forces:
When determining your borrowing capacity, the lender will take into account your combined income, assets, credit history and expenses.
To estimate how much you can afford to borrow, you can use our borrowing power calculator below. Simply enter your details, including your income and expenses.
Remember to select 'joint' for the application type and include both your incomes.
There are many ways to find a home. You can go down the professional route and enlist the services of a buyers agent or financial planner. They'll review your budget, inform you of the costs that you'll likely pay, as well as of the trends and offers that are currently available on the market.
You can also go down the buying route yourself. This will require a sound knowledge of the market you're looking to buy in, as well as a large amount of research. For more information consult the first home buyers guide.
Do you want a unit or house?
How close do you want your property to transport, schools and shopping?
What's the condition of the property you're after? Do you want something that you can renovate later, or a property that's new?
Have you had the property inspected for pests and its structural condition assessed?
While you may not want to think about it, it's wise to plan for worst-case scenarios in the event of future change, such as:
Unfortunately, relationship breakdowns occur. If you want to protect your finances, it may be worth signing a co-borrowing agreement which will outline the future management and distribution of your assets in the event that the relationship ends.
A co-borrowing agreement can be arranged by a solicitor. This agreement will outline what will happen to the property and regular repayments in the unfortunate event of relationship breakdown.
To develop your exit strategy, include special clauses in the co-borrowing agreement or in your will. In the event that you pass away, your co-borrower will assume responsibility of your mortgage repayments. Learn more about what happens to your home loan if you die.
You can also take measures to protect yourself from market changes such as taking out a fixed-rate or split-loan mortgage to protect you from interest rate rises. Consider opting for a home loan with a portability feature or one that allows you to take a repayment holiday in the event that you experience financial hardship.
It's advisable that you have a contingency buffer of funds for a 'rainy day' by keeping $10,000 - $15,000 in an offset account.
Doing some groundwork is highly important if you're thinking of purchasing a property with a partner. You need to carefully evaluate your strategy and the type of home loan and features that will suit your financial situation.
For instance, you may want to opt for a home loan that allows you to make unlimited extra repayments as this will help you to minimise the amount of interest payable over the life of the loan.
If you need to change the property ownership of your asset, you'll need to budget for various costs including stamp duty and capital gains tax (CGT) and you'll need to complete the required paperwork to ensure that the property title remains up-to-date. If you need to
If you need to remove your partner's name from a property title, you'll need to complete a transfer of title form which can be accessed from your relevant state government department. Keep in mind that you may also need to get new mortgage documents drawn up from your lender.
Learn more about refinancing your home loan following a divorce to see what options are available to you. In these situations, you should seek independent advice from a conveyancer or a solicitor.
Before completing a transaction, it's a good idea to get yourself covered for any incidences which will render you unable to service your mortgage. If anything happens to you or your partner, the financial burden may be too significant to bear without insurance. Make sure you take out a life insurance and home and contents insurance policy.
James Millard, Director of financial advice and mortgage broking firm Sufficient Funds stands as a trailblazer in Australian financial services. Combining a B.Comm, majoring in finance, almost two decades of financial expertise, and a unique entrepreneurial spirit, he leads his large team and clients with the philosophy that champions aligning financial decisions with personal values.
His hilarious and deeply insightful book, Insufficient Funds, furthers his mission of empowering individuals through financial literacy with a relatable approach.
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My Son is wanting to buy a house and live with his girlfriend, but she is not able to fund any of it.
My questions is what should he do to cover himself if the relationship breaks down?
One thing he is considering is part leasing to her so she cant claim on the house if anything should happen down the track.
I don’t think he should consider this however, as she is not a good saver and although they have been together for several years (not living together) I worry that she may make a claim down the track if anything should happen!!
Does anyone have ay ideas?
Hi Sun of a Gun,
Thanks for your comment.
It may be best to have a legal professional curate a contract to protect your son’s interest before purchasing the property. Though the fees can be expensive, you’ll need to consider whether the cost will outweigh any potential problems in the future.
This article about adding your partner to the house title explains the different options available and what legal implications there are.
Please let us know if you have any other questions.
Cheers,
Shirley
Thanks Shirley for your advice. However he is not planning on adding her name at this time, he is only considering having her pay rent to begin with. not sure if this is the right thing to do?
Hi Son of a Gun,
If she intends to pay him rent then generally she doesn’t have any legal ownership of the property as she would act as a tenant. If the property is solely in his name, and the relationship breaks down there shouldn’t be any implications for him to ask her to leave the property permanently.
Hope this helps,
Shirley