Q: My partner and I both have investment properties, but we’re now looking to buy a home together. Is buying property with a partner different to buying property alone? We aren’t married, so what do we need to consider before buying a new home together?
A: Establishing a new home with a partner is an exciting time in your life, but there are some important differences between buying alone and buying with someone else.
When buying with another person one of the key things to consider is what type of land ownership, or tenancy, you want to sign on the dotted line as; tenants in common or joint tenants.
This is where buying with a partner can impact the option you choose because there are legal and practical differences so it’s important to consider this carefully.
Tenants in common
Typically the preferred type of property ownership for friends, business associates or family members when each person involved in the purchase has put in money for the property. This can also work for married or de facto couples who want to keep their stakes in the property separate.
Tenants in common can own a property in equal shares, or own their individual share based on the percentage they invested.
It is easier to divide and sell property if it has a tenants in common arrangement because any tenant can leave their share to whoever they choose in a will. The upside is you can change to a joint tenancy agreement later if you want, with both parties’ agreement.
Often opted for by married couples, this involves both parties effectively owning the property together equally. If one of the joint tenants were to pass away, their share of the property would automatically be given to the other without the need for a will, and this is called the ‘law of survivorship’.
A joint tenant can’t leave their share of the property to anyone else in a will, however you can change the ownership to a tenants in common arrangement without the other owner’s consent; but they will be given notice.
If there are any complications to your situation with your partner, it might be wise to seek legal advice when choosing the best approach for you.
While it mightn’t sound like the most romantic way to start a new home with your partner, agreeing what you want and getting it in writing can help prevent issues in the future.
Similar to a pre-nuptial agreement (but don’t think of it like that), they can set some ground rules and protect both of you by outlining your rights and responsibilities. This leaves no confusion and can help to avoid conflicts or disputes if things do turn sour.
Borrowing with a partner
If you and your partner both plan to have your names on the property contract, then you need to be co-borrowers. This means you are both responsible for the debt, and if one of you stops paying then the lender can legally chase the other to repay the full debt outstanding. Get expert advice from a mortgage broker over how best to structure your loans, particularly as you both have investment properties. They might also have equity to help fund your new home together.
Ultimately, getting good, independent advice is the best thing you can do when making such a big financial commitment with another person. A written, signed contract is your best legal protection as an unmarried couple, and if you end up getting married then you can include a sunset date so you don’t always have a contract hanging over you.
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