Wedded bliss : top ten tips for couples looking to buy their first home together
Couples often have the upper hand when it comes to buying property together due to having a combined income and higher spending power. Coupling up could therefore take you one step closer to buying your dream home. However there are some important differences in the homebuying process for couples and singles. Here we help you through the maze for those entering the property market for the first time.
Take a good look at your finances
If both you and your spouse have a good credit history, your chances of qualifying for a mortgage will increase. By pooling your combined income, you will be able to afford a larger deposit and therefore get a better deal for your mortgage. However you need to be honest with your partner about your credit history which includes any credit card debts, outstanding student loans or even a county court judgment. This means you will be better equipped to approach a bank or building society and explain any potential issues with your credit history.
Do your research and start budgeting
Make sure that you have done your homework thoroughly and researched how much your new home will cost, including additional costs such as legal fees, removal costs and stamp duty. You also need to look to the future – the bijou waterside apartment you have set up heart on now may not be quite so practical with a couple of kids, a dog and a hamster in tow. Start budgeting now and prioritise what you can and cannot live without in order to save up for the deposit. Do you really need to go on that luxury safari holiday this year?
Saving for a deposit
A combined income means in theory it should be easier to save up for your deposit but the present hot-headed property market means for most people it will still be a struggle. It is estimated that first-time buyers in London need to earn on average £77,000 to buy a home and £41,000 for the rest of the country. Some couples decide to move back in with their families while they save for a deposit. Moving in with Mum and Dad may seem like a retrospective step but it does free up cash you can then use towards the deposit.
Consider a Help to Buy ISA
The government has introduced Help to Buy ISAs for first-time buyers to help with saving for their deposit. The system works by boosting your savings with additional government cash. Anyone who plans to buy their first home in the UK can open a help to buy ISA and the good news for couples is that one ISA is allowed per person so that if two people are buying together, they can each receive the bonus. For each £200 that a potential homeowner earns towards a deposit for their first home, they will receive a top up of another £50 from the government. This is up to a maximum of £3,000 per ISA holder or £6,000 for a couple.
Optimise your chances of getting a mortgage
A recent survey of ‘generation renters’ in the 20- to 45-year-old age category, conducted by the Halifax, revealed that more first-time buyers are worried about their mortgage application being rejected than before (55% in 2011 compared to 65% in 2015). However recent figures from the Council of Mortgage Lenders in fact show that mortgage approvals for first-time buyers are on the increase. Optimise your chances of mortgage success by getting good advice from an independent mortgage advisor on the products available. If your partner’s poor credit history will hurt your chances of qualifying for a loan, you could consider making a solo application but do take legal and financial advice first.
What other help is available?
There are a number of government schemes which could help you onto the property ladder. With these schemes, such as the Help to Buy, you may only need a 5% deposit with the government or property developer lending the rest. The Help-to-Buy scheme is available on homes up to £600,000 and there are two options available – an equity share or mortgage guarantee scheme. The loan is interest-free for the first five years but you will start paying interest from the sixth year. Another option is a shared ownership scheme, often run by housing associations, where you own part of the property and pay rent on the rest.
The bank of Mum and Dad
If both of you are earning only a modest wage, then any financial assistance from your parents could make a real difference in getting onto the property ladder. This is particularly the case with prices rocketing in London and the South East. The Halifax Generation Rent survey found that one in four first-time buyers had to rely on their parents to help them raise a deposit. Alternatively if you have a family member who will act as a mortgage guarantor, this could be another option worth exploring. This means a family member guarantees to pay the mortgage in the event you or your spouse defaults. However be aware that a guarantor could be at risk of losing their own home in the event that they too are unable to make the mortgage payments.
Make it legal - Investigate making a partnership agreement
For couples cohabiting or engaged (or already married) and looking to purchase a home together, take legal advice on how the property will be held and whether it is worth making a prenuptial or cohabitation agreement to protect your assets in the event the relationship break s down. The agreement can outline the ownership terms, who pays for expenses such as mortgage payments and taxes, and how the property will be divided in the event of a break-up. Although drawing up a partnership agreement now may not seem very romantic now, investing in property together can make you financially vulnerable if things do not work out.
Track your finances
If you are successful in qualifying for a mortgage, develop a good system for monitoring your combined finances. The first step is to create a shared financial budget that you both can stick to. Simple measures like setting up a joint bank account for paying the mortgage into can simplify the process of tracking your finances. You could also consider a budgeting app to stay organised.
Above all, set a regular time to sit down together and review your goals and your financial position to make sure you are staying on track. Have an honest discussion with your partner about your financial priorities so it does not cause resentment and both parties are in agreement. This will help lead the way to mortgage nirvana.