For starry-eyed couples, buying a home and moving in together can be an exciting time.
It’s also a big step in a relationship, particularly as the most common loan terms in Australia are 25 and 30 years1, and it’s likely to be the biggest debt you’ll ever take on together.
With that in mind, there are some financial considerations you’ll want to discuss with your partner early on, which could also help you to avoid any nasty situations down the track.
The initial money talk – are you on the same page?
Before you start researching lenders and trawling through real estate websites, there are a few things you should probably discuss with your partner first, if you haven’t already.
This might include things like:
- Your views on money management
- Your financial situation—income, expenses, assets and debts
- Your credit history, as a bad credit rating can impact your borrowing potential
- The amount of money you’ve both saved and whether you’ll have assistance
- Your shared financial goals outside of property—travel, marriage and children
- Your job security and whether you see a career change on the cards
- Your contingency plan if one of you is unable to work at some point in the future.
These are important things to address as they could impact the type of property you buy, the price you’re willing to pay and factors such as whether you move in to the property or rent it out.
It might also determine how you’ll split the deposit, the repayments, insurances and incidental costs.
The property market – have you done your research?
Once you’ve had an open conversation about each other’s financial situation, it’s important to ensure you’re both across the costs involved with home ownership—government fees, interest charges etc.
For a full run-down of the upfront and ongoing costs you’re likely to come across, and a handy checklist, check out our article: How much it really costs to buy a property.
Another major element will be how much you can borrow, which will depend on things like the deposit you've got, income and any other debts you have.
Laying down the ground rules – what should you put in writing?
There can be different rules for married and unmarried couples but whatever you’re situation, it’s good to put things in writing just in case the unexpected happens.2
- Sign a co-purchase agreement
This is a legally-binding document which will detail each person’s rights and responsibilities, including how mortgage re-payments will be divided, in addition to how disputes will be resolved should the relationship break down or someone fails to make repayments.
- Be conscious of joint and several liability
This is a clause under which you’re both jointly responsible for each other’s debts—if your partner doesn’t pay, the bank can come after you. It’s a good idea to address this in your co-purchase agreement and see what the bank can do to limit your liability as a co-borrower.
- Decide if you'll be joint tenants or tenants in common
Many married couples choose joint tenancy so if one dies, the property automatically transfers to the surviving spouse. A tenant in common arrangement however, can make it easier to divide and sell your share of the title, which could be helpful if the relationship breaks down.
A well-oiled machine – how can you operate effectively as a team?
To help you on your way, we have a range of tools that may be able to assist on the road ahead.
- Check out our tips on maintaining your lifestyle and owning your home sooner
- See our range of calculators that can help you budget and save.
AMP also offers a range of home loan options that might suit you. Our home loan specialists will be there to simplify and guide you through the process.
AMP has a range of home loans
Speak to an AMP home loan specialist to learn more about our competitive rates.
Preparation and readiness in the weeks leading up to settlement can be the difference between make or break for first home buyers.