Buying a home with a partner

In a scenario of volatile interest rates, the soaring cost of living and a challenging economic outlook, sharing the costs of entering the property market seems like an ideal solution for many South Africans.

For married couples buying a property together, any unforeseen circumstances should be covered by pre-nuptial agreements, provided the marriage contract is carefully worded. But when unmarried couples, friends, siblings, parents and children enter into such an arrangement, it is equally important to ensure a watertight contract is in place to cover any eventualities.

“You should never be lulled into a false sense of security because you are related to or in love with your purchasing partner,” says Andrea Tucker, Director of MortgageMe. MortgageMe is an online bond aggregator which uses a digitised application process that automates tailored submissions to the country’s major banks and lenders on behalf of prospective property buyers.

“Life may throw anyone a curve ball at any time, and the circumstances of one, or other, or both the partners may change, making the agreement no longer viable.

“You may think that drawing up a partnership agreement is not conducive to a harmonious relationship, nor very romantic for couples. But you simply must be realistic in creating a document that equally protects both parties.”

Finances

Financial institutions are very open to granting mortgages to more than one individual for a single property, providing each individual complies with their qualifying criteria. This includes having a good credit rating and a steady income.

Depending on your circumstances, you and your partner may have a 50/50 arrangement, or each of your contributions may be disproportionate. For instance, you can decide whether to pool your salaries or contribute to the property in proportion to your individual earnings.

Another financial consideration to talk about at the starting point is whether or not to open a joint bank account to manage the property-related costs like bond repayments, insurance, rates and taxes. A well-managed joint account can make splitting costs equitable and easier to track. It’s also a good way to save money for a rainy day or unexpected home repairs, says Tucker.

Sharing

To avoid possible future conflict, you must clearly define the percentage of ownership. This includes all aspects of the agreement – from deposit to the respective shares of monthly bond repayments and running costs.

“In the offer to purchase, and more importantly, on the title deeds, each person’s shareholding should be recorded. This will go a long way to mitigating any issues when the time comes to sell the property. If the shareholding transfers into one of the names only, it’s important to be aware that a lawyer would need to do this and that costs will be incurred,” says Tucker.

“Keep in mind, though, that no matter what your percentage ownership in the property is, you and your co-owner are equally responsible for paying the monthly bond instalments. Banks insist on joint and several liability, which means that both you and your partner are responsible, together and individually, for the full loan amount.”

If you will be living in the house together, another aspect to consider is how you’ll make major decisions. Examples include property upgrades, decorating, and rules concerning shared spaces like the kitchen and bathrooms. Tucker says you should even specify who brings what furniture items into the house.

Exit strategy

When entering into a joint purchase agreement, you need to think ahead to the eventual sale. This may be a mutual decision, but it could come about when one of a non-romantic partnership meets someone, gets a new job and must relocate, or they’re retrenched and can no longer afford their portion – or even death.

“You need to decide upfront how you will dissolve the partnership and divide any proceeds of the sale. This needs to be included in the contract. Property is a long-term investment, so forward-thinking is imperative,” says Tucker.

Good investment

“A joint purchase is an excellent way of entering the property market and getting a start using the power of two incomes – provided you think and act carefully,” says Tucker.

“If approached in the right way, joint purchasing is a way of encouraging more people to own their homes. This roots them in the community and the country. It’s good for the economy and enables more entrants into the property market. If buyers pick their partners – and their properties – carefully, it is a win-win situation for everyone.”

Writer : Sarah-Jane Meyer