When you and your partner decide to buy a house together, you have a lot to look forward to and challenges as well. Aside from questions about where to live and what you like, you will need to familiarise yourself with the process involved in buying a house and how the real estate laws work. For example, how does moving in with a partner who owns a house differ from a married couple buying a house under one name in Australia?
Even though it is an exciting time, make sure you have explored the pros and cons of buying a home together before signing on the dotted line.
To help you understand the process of purchasing a home with a partner, here are five steps you and your partner must work through before getting the keys to your new home.
1. Make a Budget and Get Pre-approval for a Home Loan
This is a crucial step that you simply must not pass over in favour of talking about flooring and landscaping.
When it comes to budgeting, many couples overestimate how much money they are working with and how far it will go. This is a step where you want to be conservative with the numbers. A safe zone to aim for with your mortgage is 28-30 per cent of your income. You want your budget to indicate your ability to maintain the lifestyle you want.
For example, if you and your partner agree that one of you will stay home with a baby for a few years, you must base your budget on the partner’s salary, who will continue to work after a baby is born. Failing to do so will likely result in your inability to fulfil that goal.
Look at the facts.
- How much have you saved for a down payment?
- Are there grants (like the first home loan deposit scheme) that can help you?
- How much can you borrow from a bank, and is the loan conditional?
- Have you factored in the cost of insurance, loan fees, and stamp duty?
- Have you made an allowance for an unforeseen event that can throw your plans into chaos?
Get pre-approved for your loan right away. This will strengthen your position as a buyer when you are ready to make an offer. Pre-approval also helps you zero in on attainable homes and not spend time looking at houses you cannot afford.
2. Define Your Dream House Together
Buying a house together can be a complicated process that requires patience and compromise. Many couples believe they are on the same page regarding a dream house. Then reality sets in as you compare notes.
Answering a few key questions separately and then comparing notes is a good way to see the similarities and differences of what constitutes a dream home for you and your partner.
A few things you should determine include,
- Which areas are we targeting?
- How close must it be to each partner’s job?
- Is public transportation a must?
- How many bedrooms do we need?
- Can we happily start small and eventually get a bigger place?
- Do we need a home in move-in condition, or will we enjoy working on our house together?
After comparing notes, you and your partner will need to compromise and prioritise to come up with your list of must-haves and a list of what would be nice to have.
3. House Hunt with a Plan
When it comes down to it, house hunting may be exciting, but it is also frustrating and quite time-consuming. Creating a plan with your partner can help you weed out what is not for you so you can focus on houses with potential.
Take notes and pictures at the properties you visit to help you keep the various houses straight when you go back to discuss them. Make a note of your favourite home so far and use that as the way to measure all subsequent homes. Remember your must-have and dealbreaker lists and do not become impatient and choose a home that will not meet your needs.
4. Make an Offer the Seller Will Not Refuse
Once you know you want to buy a specific home, you must prepare to make sure your offer is fair to you and your partner as well as the home’s present owners. In many cases, your best course of action is to offer your best price straight away to avoid being bested by someone else.
If you are purchasing a home with your partner through an auction, remember to caution yourself about overbidding. A good point that may help you reign in your enthusiasm is that you must pay ten per cent down that day if you win the auction.
5. Safeguard Your Future by Preparing for the Worst
Although you will enjoy looking at landscaping and floor coverings more, you must make a plan regarding the future of your investment. No couple wants to think about a future with break-ups, unemployment, illness, or death. However, these are genuine possibilities.
Start protecting your investment by arranging the necessary insurance. Also, create a co-purchase agreement to spell out the details around your home purchase.
At the same time, be sure that you have set aside enough money to cover six- months of expenses. This amount should be enough to get you and your partner through a rough financial patch.
Pros and Cons
Before you move forward and finalise your home purchase, consider the pros and cons.
- Easier to Get a Loan – If you have a partner with a stable job and a good credit score, you will have a greater chance of securing financing for your purchase
- You are Building a Future – Buying a house with your partner is as much of an emotional investment as it is a financial one. Choosing where to live and compromising on home details throughout the process can also strengthen your bond with your partner.
- Your Partner’s Finances Can Drag You Down – If your partner is not working, has credit problems, or carries a great deal of debt, you could pay the price. Financial institutions may be unwilling or unable to work with you, or you could face higher than average interest rates on your loan.
- Risks if You and Your Partner Separate – No couple working on purchasing a home together with wants to think about breaking up somewhere down the road. While it may not seem romantic, working with individual solicitors to create a contract with a fair property division is an excellent way to protect yourself if the unthinkable happens
Purchasing a home with your partner is an exciting extension of your relationship. Nest Realty has experience in helping hundreds of couples make the transition to homeowners easily and with as little stress as possible. You do need to have professional representation to finalise your purchase. Reach out to us at Nest Reality and open the door to your new home.