Tips regarding your first joint property purchase
Purchasing a property together is exciting for most couples. After all, such a deal involves a lot of money and it also is a long-term commitment. The joint project can bring a couple closer, however, it can also lead to a lot of stress and troubles, especially if not planned well. This is why you should take your time and really plan this major investment in your future. Make sure you plan every step. Especially if you want to purchase a property as an unmarried couple you should make sure you are protecting your (respective) interests by setting up a contract to make sure you won’t wake up to a nightmare one day. The following tips can be seen as some kind of guideline.
Checking your bank account
Especially couples with separate bank accounts need to openly discuss their financial situation prior to purchasing a property. Go through your finances together: How much does each of you earn per month, how much do you have in cumulative savings? Do you already own a property that you can use as security for a mortgage? Only by being open and honest about your financial situation will you be able to realistically calculate risks and come up with a solid financial plan. You need to know how much capital you have and what your monthly budget for financing a property is.
Looking to the future together
Property is a long-term investment and you will be liable to your bank for a long time. This is why you should take a look at your future before buying a house or apartment. Do you, as a couple, really have the same wishes, plans and goals? What does your family planning look like? Does one of you possibly want children while the other one doesn’t? Discussing such topics may be difficult at times, however, they should be debated once you have decided to purchase a home together. What happens, for instance, if you suddenly rely on one salary instead of two, be it due to having a baby or losing a job? Will you still be able to pay your monthly rates? As incomprehensible as it may seem, you should consider issues such as a separation, an illness or even death and discuss different possibilities of what will happen with the property should any such case materialise. Who will remain living in the home and taking over the monthly rates and costs?
Don’t be afraid to set up contracts
When it comes to purchasing a home, romantic ideas should take the backseat. Your love for each other may be infinite at the moment, however, you cannot be 100 % sure that this will always be the case. This is why you should always put clearly defined contractual agreements in place, in writing. Especially if the two of you bring different amounts of financial resources to the equation, you should set up a contract that will clearly stipulate the conditions in case of a separation. For unmarried couples, this could be something like a cohabitation contract that clearly defines what will happen in case of financial issues. You should have a contract regarding inheritance rights in case of a possible death. Think long and hard about who should be the person named in the registry of deeds as this has far-reaching legal consequences.
The different types of property
Depending on your financial situation you have the choice between three different types of ownership: Sole ownership, total ownership, or joint ownership. Sole ownership means that only one party is contributing their capital and will thus be the sole party named in the registry of deeds. This party can freely operate and decide what to do with the property while also being the one held responsible. In case the house or apartment is in ownership of the couple, it may not be sold without the agreement of either partner.
Total ownership means that several parties contribute and that the property will be divided equally between these parties irrespective of how much capital each party contributed. The owners can only make decisions jointly and it is not possible to sell individual parts of the property.
In case of joint ownerships, both parties contribute financially, and both parties will be named in the registry of deeds along with their share of ownership. Both parties can freely decide what to do with their share, however, they are also responsible for their respective shares. In case one of the owners wants to sell, the other owning party has the right of preemption.
Most couples decide to go for joint ownership as this has the least potential for conflict in case of separation.
Financing your own home
A solid financing plan is one of the most important things to consider when purchasing property. This usually includes a visit to your bank. Make sure you are up to date regarding the different types of mortgage available. In case of cohabitation you should think long and hard about how to go about financing your home. It is usually easier to be approved for a mortgage if both parties are earning a steady income as this means more security. In such cases, the bank does not care if one of you brings a higher amount to the equation, however, both parties are held liable in equal parts. In case the property is divided in unequal parts, you should make sure that your obligations are divided accordingly (e.g. by setting up a private loan contract). Do not forget to consider topics such as pension and recurring maintenance costs. Unfortunately, owning a house or apartment does not mean you will be living completely free of charge (repairs and renovations, additional costs). In case the length of your mortgage contract exceeds your professional life it is important to make sure that you will still be able to pay the monthly rates with your pension. Make sure to keep every agreement in writing and keep all receipts and invoices - this will help you keep tabs on how much you have invested and on your property’s worth.
RE/MAX for more safety when buying property
As you can see, purchasing a property is a complex matter. Especially if you are a first-time purchaser, there are loads of potential pitfalls. This is why you should not forgo hiring a real estate expert who can help and support you with his/her expertise. All RE/MAX real estate agents know what to consider when it comes to purchasing property. They can offer a comprehensive service, including after-sales support, and guide you through the entire process. Arrange a noncommittal consultation with a real estate expert in your area. One phone call can save you lots of trouble, money - and prevent sleepless nights.