Buying a home with a partner before getting married is a lot more common than it used to be.
According to a study by Mozo, 23% of Australian couples who had purchased a property together did so before getting married. And the average age of first homebuyers is now lower than the median age of marriage.
So in other words, if you’re thinking of buying a home with your partner, you’ll be joining thousands of others who have done the same.
But it’s not without its complexities, and it’s important to be aware of the financial and legal implications.
If you’re thinking about buying a home with your partner, then this guide will tell you everything you need to know.
Here’s what we’ll cover:
- How property ownership works when you’re in a de facto relationship
- How to prepare for buying a home with your partner
- Ownership structures and how they work
- And much more.
So if you and you partner are ready to start the journey of homeownership, then this is for you.
Let’s dive in.
Table of Contents
Watch the video: Navigating the Complexities of Co-Ownership
How property ownership works when buying a home with a partner
In the eyes of the law, de facto relationships and marriages carry similar weight when it comes to property ownership.
The Family Law Act 1975 defines a de facto relationship as one where two people, who are not legally married or related by family, live together on a genuine domestic basis.
The “genuine domestic basis” part of this act is a little bit ambiguous, but in essence it means this: if you are living with your partner in the same home, and you share household responsibilities, bills, etc., then you are considered to be a in a de facto relationship.
So in other words, buying a home with your partner is the same as buying a home with your husband or wife, at least as far as the legal system is concerned.
Preparing to buy a home with your partner
Buying a home with your partner is a huge financial decision.
To make sure that you’re ready to buy a home and that you’re making the right decision, there are a couple of things we recommend doing:
- Make sure you’re on the same page financially
- Be prepared for the responsibility of a home loan
- Have some uncomfortable conversations
Let’s take a look at each of these in more detail.
Make sure you're on the same page financially
Before you dive into the deep end of a joint home loan, we recommend making sure that you’re on the same page in terms of financial habits and responsibilities.
You may already be sharing financial commitments with your partner. If so, great! You should hopefully have an accurate picture of how they are with their money.
If not, here are some things you may want to consider sharing before buying a home:
- Rent or lease payments
- Utility bills such as electricity, water, and internet
- Groceries and household items
- Joint bank account for shared expenses
- Car payments or other loans
- Saving for the home deposit
Be prepared for the responsibility of a home loan
A home loan is a long-term commitment with significant financial implications.
Before you commit to buying a home, make sure that you’re ready for the responsibility.
Here are some things to consider:
- Being ready for a home loan is more than being able to afford the monthly repayments
- Are you prepared for potential interest rate rises in the future?
- Does buying a home fit in with the long-term goals for you and your partner?
Uncomfortable conversations: how will you handle things if the relationship ends?
When you’re in the throes of love and the excitement of buying a home together, it’s easy to overlook the possibility of a relationship breakdown.
However, it’s crucial to have these uncomfortable conversations early on.
Discussing what happens if the relationship ends can help prevent potential disputes and ensure a smoother process if you do decide to part ways.
When buying a home with a partner, it’s important to establish ground rules and have a clear agreement about property division in case of a breakup.
This should include details about how mortgage payments, maintenance costs, and other expenses will be divided, as well as what happens to the property if you separate.
The three key factors to consider when buying a property with a partner
Buying a property with a partner can be complicated, but really it comes down to four key factors:
- How much will each partner contribute to the deposit?
- How will the loan repayments be divided?
- What will be your exit strategy if things don’t turn out as you hope?
- What is the best ownership structure for you?
Let’s take a look at each of these in more detail.
How much will each partner contribute to the deposit?
You may want to contribute equally to the deposit, or agree to contribute a fair amount based on your earnings and financial situaion.
How will the loan repayments be divided?
As with the deposit, you should discuss how you will be sharing the cost of repayments. Will you share equally, or contribute a portion based on how much you earn
What is the best ownership structure?
The two most common ownership structures are joint tenants and tenants in common.
In a joint tenancy, both partners own the entire property together. If one partner passes away, the property automatically goes to the surviving partner, regardless of what’s stated in the deceased partner’s will.
In a tenancy in common, each partner owns a specific share of the property, which can be equal or unequal. If one partner passes away, their share goes to their estate and is distributed according to their will.
Guarantor Home Loans when buying with a partner
For many first home buyers, having a guarantor can make the dream of homeownership a reality sooner.
A guarantor, often a parent, uses their own home’s equity to provide additional security for your home loan.
This can help you avoid the cost of Lenders Mortgage Insurance (LMI), which is typically required if you’re borrowing more than 80% of the property’s value.
If you plan on using a guarantor when buying a home with a partner, you’ll need to be extra careful about what happens if you break up, as your parents will be financially entangled in the situation.
Read more: Guarantor Home Loans
Expert advice: the key to successfully buying property with a partner
Buying a home is likely one of the biggest financial decisions you’ll ever make, and it’s even more complex when you’re doing it with a partner. That’s why it’s crucial to seek expert advice. Professionals can provide you with the information and guidance you need to navigate the process confidently and make informed decisions.
Here’s who can help:
A Mortgage Broker can play a vital role in helping couples find the right ownership structure and loan to suit their unique needs. They can guide you through the process of applying for a home loan, help you understand the different loan options available, and assist you in finding a loan that suits your financial situation and goals.
A financial planner can also be invaluable, especially when multiple parties are involved. They can help you structure your loan in a way that protects all parties, plan for the future, and ensure that your home purchase aligns with your overall financial goals.
A legal professional can help you understand your rights and responsibilities, guide you in setting up the right ownership structure, and assist you in drafting any necessary agreements, such as a co-ownership agreement.
Key points to remember when buying a property with a partner
The trend of buying property before marriage is becoming increasingly common in Australia.
While this path offers many advantages, such as the ability to pool resources and enter the property market sooner, it also comes with its own set of complexities.
Understanding these implications is key to navigating the journey of homeownership successfully.
From discussing financial commitments and setting ground rules to choosing the right ownership structure and preparing for the unexpected, every step of the process requires thoughtful consideration and mutual agreement.
Given the financial and legal implications of buying a home with a partner, seeking professional advice is crucial.
Whether it’s a mortgage broker, a financial planner, or a legal professional, their expertise can guide you through the process and help you make informed decisions that protect your interests.
Remember, buying a home is not just a financial decision; it’s a commitment that affects your life in many ways.
So, take the time to understand the process, communicate openly with your partner, and seek the advice you need to make this significant decision confidently.
Thinking about buying a home with your partner? We're here to help
If you’re feeling overwhelmed or unsure about any aspect of buying a home with your partner, remember that help is available. Just give us a call on 1300 088 065 or request a free assessment with one of our expert brokers.
We have helped thousands of Australians to buy their first home and we’d love to help you too. .
Remember, the path to homeownership is a journey, not a race. Take the time to understand each step, make informed decisions, and seek professional advice when needed. Your dream home is worth it.