When love brings you a mortgageComment on this story
Investing in property is usually the biggest financial commitment that any individual will make. Increasingly, people are looking to purchase a home with a friend, sibling or partner to halve the costs and increase the likelihood of bond approval.
But as with any other big commitment, this is not a decision that should be taken lightly.
“If two people are looking for a home at the same time, sharing a property may seem like the ideal approach, but the partners need to have worked out all the ins and outs of the process before putting pen to offer,” says Jenny Rushin, ooba Western Cape sales manager in a press release.
Making the commitment
She advises that both parties should sit down for a serious discussion before the potential property has been identified and the excitement could cloud judgement, and consider what will happen to the property in various different scenarios.
“Consider what will happen if one partner wants to leave for any reason, or even in the unfortunate event that one partner dies,” she says. “The decision should be made upfront and then, once the home is purchased, committed to paper - either a contract between the two or a will drawn up by a lawyer. The one thing that co-ownership won't save the partners is paperwork.”
Both parties should be willing to disclose any financial issues that might affect the partnership, as they will naturally have to be independently subject to all the same financial assessments by the bank as individual buyers.
“Partners who have bought a property together should then either ensure that the costs of buying and maintaining the property are equally shared,” advises Rushin. “If this is not possible, then it is important to keep careful track of both parties' expenses in relation to the property so that the proceeds can be split fairly when the property is sold.”
It may happen that one person in an unmarried couple may already own property. If the other person moves in and begins to make a contribution, then again, the paperwork should record the contribution and, if the couple feels that they are starting a life together, the property should be registered in both their names. In this way, they will both own a share in an immovable property and neither party will be at a financial disadvantage.
“The owner would have to sell half of the property to their partner at a fair market rate,” says Rushin. “The fees would include transfer duty, the costs of cancelling the existing bond and registering the new bond in both parties' names.”
Again, an agreement will have to be reached detailing how the bond repayments will be split, and both parties will have to keep track of any expenses that they incur in the maintenance of the property.
As for the married ones
In the case of a marriage, the way that the property is owned and divided or how the proceeds are shared if the couple splits will be governed by the type of marriage contract they have.
“If they are married in community of property, then both parties are liable for the debts individually or together, and will share equally in any gains,” says Rushin. “If they are married out of community of property, they will each own a share of the property and can do what they want with it.”
While it may be uncomfortable to plan for the end when making a new beginning - be it a marriage or a simple co-ownership commitment - considering every potential outcome upfront can save a lot of potential heartache and disagreement in the long term.
Top tips for property partners
For partners considering starting out in the property market, Darren Brander from Smith Tabata Buchanan Boyes, one of ooba's partnering attorneys, advises the following:
* Buy in the best area possible that accommodates your needs, as far as possible.
* Struggle with the loan repayments with a smile - it is almost as expensive to rent and you are acquiring an asset not paying for someone else’s.
* Use the services of professionals to assist, including estate agents, attorneys, bond originators.
* Don’t think that a written record of your agreement with regard to sharing expenses and the like, in respect of the property, means that you anticipate that you will break-up. Have a proper agreement drafted because it will simplify things in future.
* Be very careful how you deal with the money in your bond account. Taking money from the bond account is similar to taking a brick out of the wall of your home - you are using the security of your investment. People who cannot repay their mortgages risk losing their homes - so be very cautious.