Couple budgeting to purchase

Tips for buying a home with a partner

Rates and Fees verified correct on December 4th, 2016

What to consider when buying a property with friends or family

Purchasing a property with your partner provides you with the distinct advantage of increasing your borrowing power during the home loan application.

Essentially, this means that you can borrow more than you would otherwise be able to borrow if you completed a single application. Borrowing with a partner allows you to split the costs of homeownership.

However, there are some choices you need to make from the outset to ensure that you manage your finances correctly.

Read on to learn about how to prepare for a joint property purchase.

Plan how costs will be shared

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.

Sit down with an accountant so that you can understand your cash flow and budget, and ask for advice about how you can manage the costs with your 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.

In addition, 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.

Considerations when purchasing with a partner

Title

Here are some things you may want to consider before joining forces:

  • How much can you both afford to borrow?
  • Do you both have good credit history?
  • Do you both have job security?
  • What's your strategy? (e.g. capital gain or positively/negative geared property)
  • What type of home loan rate and features are you looking for? (e.g. offset account, ability to make extra repayments, redraw facility)
  • Is this an investment or owner-occupied property?
  • If you are renting it out, how will the earnings or losses be split?
  • What will the property ownership structure be? (e.g. joint ownership)
  • Have you budgeted for stamp duty, legal, valuation, taxes and repairs and maintenance costs?
  • Have you done your due diligence? (e.g. research & sought expert advice)

How to save for a deposit

While saving for a deposit can be difficult, here are some tips:

  • Reduce existing debt. Review both of your finances and spending habits. Request a copy of your credit files so you can review any debts that you have listed against your names. This may help you work out whether there is room to consolidate or eliminate any debts, such as credit cards or personal loans. Next, you should identify your combined monthly expenses such as utility bills, transport and food to see if you can cut back on any of these costs. For example, if you've been spending $100 on petrol each week, consider taking public transport to work. Think about the expenses that you can forgo such as gym memberships or coffee and direct the surplus cash towards your deposit fund. Work with an accountant so you can understand how much you can set aside each month to go towards your joint deposit.
  • Identify a savings target. Once you’ve finalised your budget plan and worked out how you can both lower your ongoing expenses, the next step is to determine how much you need to save for a deposit. Depending on your timeframe and how much you’ve already saved up, most borrowers try to save up 20% of the property purchase price to avoid paying lender's mortgage insurance (LMI) (for a full documentation home loan). For example, if you wanted to purchase a $750,000 property, you’d need to come up with $150,000 to complete the required deposit. Speak to a mortgage broker during this stage so they can help you understand your borrowing power which can dictate your deposit savings goal.
  • Get creative. When it comes to make extra cash, think outside the box. Consider using skills outside your workplace. For instance, if you're a graphic designer or a photographer think about taking on freelance jobs on the side. Other ways to make cash include renting out a spare bedroom in your current property or becoming an Uber driver.
  • Joint savings account. Open a joint high-interest account that is dedicated to your deposit savings. Try to separate your deposit savings from your other accounts and keep tabs on how much interest you're earning each month. Remember that you can always ask your current lender for a better rate (use your customer loyalty as leverage). Making regular deposits into a high-interest savings account will demonstrate to the lender that you have good financial discipline.

How much can I afford to borrow?

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.

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Conduct a home loan comparison

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.

You can compare a range of home loans using the table below.

Rates last updated December 4th, 2016
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
loans.com.au Essentials - New Purchases Only Up to 80% LVR (Owner Occupier, P&I)
Low variable rate for new purchases as well as no application or ongoing fees. Special offer ends 15 December.
3.39% 3.41% $0 $0 p.a. 80% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info

It's advised that you speak to a licensed mortgage broker as they will be able to recommend suitable products to you. A broker can draw upon their panel of lenders to find a product that matches your borrowing needs.

Plan an exit strategy

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:

  • One of you dies or faces a serious illness or disability
  • One of you encounters a change in employment or income
  • A relationship breakdown
  • Bankruptcy or changes in the property market that force you to sell the property at a loss (after fees and charges)

Sign a co-borrowing agreement

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.

Property ownership

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.

Top up your insurance

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.

Images: Shutterstock

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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Related Posts

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

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4 Responses to Tips for buying a home with a partner

  1. Default Gravatar
    Son | December 12, 2013

    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?

    • Staff
      Shirley | December 12, 2013

      Hi Sun of a Gun,

      Thanks for your comment.

      It may be best to have a legal professional to 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 a partner’s name to your 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

    • Default Gravatar
      Son | December 12, 2013

      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?

    • Staff
      Shirley | December 12, 2013

      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

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