Tips for purchasing a home with your partner
Purchasing a home with your significant other can be an exciting yet daunting task as it requires you to be both informed and practical. With the assistance of property experts, we take a look at things you ought to have in place, questions you need answered and the general checklist to ensure that you are covered in the case of a dispute or spilt.
Annamarie Du Toit, principal agent at Van der Merwe & Robertson, says: “It is quite common for people in committed relationships to want to take the next step and purchase a home together. However, when a couple is not legally married, the thought of buying a home together comes with its own emotional challenges and caution.”
Should you consider purchasing property jointly, Charlotte Vermaak, principal of Chas Everitt Nelson Mandela Bay, advises a co-ownership agreement, as this should ideally cover matters such as the sale of the property, resolution of disputes and maintenance obligations.
The upside to joint home ownership is that it’s far more feasible to get a bond approval on a dual income as opposed to a single income. Adrian Goslett, CEO of RE/MAX of Southern Africa, notes: “The average bond issued is between R950 000 and R1 million, which means that the applicant would have to earn a gross salary of around R30 000 to qualify based on an interest rate of 10.50% and a repayment period of 20 years. The simple fact is that there are many South Africans who fall below this salary bracket, but who still want to own property. For them, applying for finance with a partner can make that bond amount feasible.”
The application process of joint home loan
Married or not, the process of buying joint property with your partner will remain the same, Du Toit explains. She says: “Both partners will be assessed for joint affordability through salary earnings and credit checks, the same way a married couple is assessed. The process does not change.”
Goslett advises that potential co-owners do the following when applying for a home loan:
- Shop around to find the best home loan to suit your requirements.
- Have all relevant documentation on hand when applying.
- Monthly bond repayments consist primarily of interest repayments, so know the interest rate payable on the loan and reassess after a five-year period.
- As a rule of thumb, the bond repayment along with taxes and property insurance shouldn’t exceed 25% to 30% of your joint income.
The advantages and disadvantages of a joint home loan
Along with the above pointers, Goslett highlights that the perks of having a joint home loan includes the shared financial burden between partners. Both buyers can contribute towards the deposit, bond repayments and other financial responsibilities associated with homeownership.
Despite the benefits, there are also penalties that may be faced as result of late or skipped payments on the joint loan. Therefore, it’s important to understand the complexities and risks when embarking on home ownership with someone else.
How to ensure each parties’ protection
Both parties need to discuss and ensure that each person has a clear understanding of what is expected of them. The agreement should be made in writing, stipulating each partner’s set of responsibilities and how certain situations will be dealt with, if and when they arise. This agreement must be signed by both parties as this will protect them should a dispute occur in the future.
Goslett adds: “As with any property purchase, the parties must have an idea of their future plans and how this could impact on the partnership. For the partnership to be viable, both parties will need to be in agreement with all factors that impact the property.”
To protect both co-owners, Goslett suggests that each partner keeps a record of all documents and payments made that relate to the property they jointly own. If one person defaults on any payments, all partners are held liable.
“An additional precautionary measure would be for each partner to draw up a last will and testament addressing what happens to the property should anything happen to them,” adds Goslett.
It all comes down to choosing the right partner when making a long term decision/investment such as buying a home. If any party defaults on their agreement, both parties will be held liable in the bank’s eyes. So, it’s important that you relationship is based on trust and honesty.