Buying a property with a partner (not married)

LBig Bad Bagheera on 04/01/2017 - 10:14

Hi Oz bargainers,
I’ll provide as much detail and life background since this is often noted as missing from forum posts :)

I’m 23 working in a position with high security and promotion/advancement opportunities and my partner is 21 working 30+ hours a week whilst completing her degree part time. (12 months remaining)

As we have been living at home we have saved enough to be able to purchase the kind of home we’re interested in with a parental guarantor loan. We could just afford to live in it now on our incomes however to make it easier on ourselves we are planning on leasing it for a further 12-18 months. Giving us time to increase our combined income and save up for things needed to move in.

My partner and I have been together for 4 years, are very happy together and have absolutely no current or foreseeable future reason to be breaking up.

That being said buying a property with someone is a massive commitment and I always like to plan for the worst case scenario.

What are the foreseeable consequences/financial losses associated in separating in a relationship and thus the property which has been bought together.

I like to imagine if it did happen we’d be civil about it and one of us (most likely me) would pay out the amount the other has put towards the house (the deposit and total amount of repayments made)

That being said what are some other things I should be cautious about / consider?

TL;DR:
Buying property with partner, what’s the worst that can happen if we break up?

Financial

Comments

  • [Deactivated] on 04/01/2017 - 10:16
    +6

    Buying property with partner, what’s the worst that can happen if we break up?

    Watch a few episodes of Judge Judy and you'll find out.

    • Big Bad Bagheera on 04/01/2017 - 10:41

      Haha as funny / terrifying as the idea of being of Judge Judy is, we are both reasonable, level headed individuals and I like to imagine something like that would nevet happen 😊

      • k-rokfm on 04/01/2017 - 11:22
        +2

        And most couples that get married or anything like that honestly never think it will happen - but it does, and very often. And when it does it can often get very very messy.

        Do you currently live with your girlfriend? I would say that you should like together for at least a year (if not a couple) and then decide whether its the right decision to buy together or not.

        You say that if you did ever break up one of you would just buy the other persons half. Would that be financially viable - considering you would be getting the loan based off both of your incomes i would see it being near impossible to get financing for the whole loan to buy the other person out.

        • Big Bad Bagheera on 04/01/2017 - 11:43

          Yes definitely agree with the first sentence hence me asking this question to the community.

          We've been together for 4 years and essentially live together between both our parents houses.
          We've traveled alone several times through different countries and house-sat homes for extended periods of times etc.
          I know these are not the perfect 'testers' to confirm our compatibility for living together but I don't think there's much we'd find out formally living together that we wouldn't already have.

          It would be financially viable for me. As mentioned we would be leasing it out for the first 12 months. If i were to finance it on my own I could comfortably afford the rent repayments with it being rented out and still living at home.
          Or since we are looking at 2 bedroom homes I could afford it with a room mate.

          I'm unsure what would happen with re-financing the loan however. I believe it may work slightly differently to the norm since will be getting the loan with a parental guarantor. I will have to find out the details with the mortgage lender we've been in talks with.

          Thanks for your help.

      • ProjectZero on 04/01/2017 - 11:22

        we are both reasonable, level headed individuals

        Oh, but this is before any potential break up… never know what will happen until it does happen

        • Big Bad Bagheera on 04/01/2017 - 11:52

          Fingers crossed :)

          Also why I've posed this question to the community to have a contingency plan if need be.

        • MeesusEff on 04/01/2017 - 12:54
          +1

          @Big Bad Bagheera: yes, do recommend fully living together for a year before considering to buy a house.

  • DarkOz on 04/01/2017 - 10:35
    +3

    Don't do it!!!

  • LaProblematique on 04/01/2017 - 10:38
    +1

    Cringe.

  • Hellfire on 04/01/2017 - 10:42
    +3

    Are you both living in the same house as the moment? How long have you been living together? You are possibly already considered a defacto couple.

    Over time the likely outcome is that you split the property 50/50 on breakup regardless of what you individually contributed. If you have kids then it will likely be skewed in favour of the primary care giver (usually the mother).

    • Big Bad Bagheera on 04/01/2017 - 11:29

      We don't have kids and have been 'living together' between both our parents houses as we live within a couple K's of each other.

      I imagine that since it's at our parents houses and changing between the two inconsistently with neither of us paying any type of rent to the other's parent it does not qualify for a defacto couple?

      • Hellfire on 04/01/2017 - 14:51

        So you officially live at your parents and she lives at hers? Ie, all mail goes to those addresses? Drivers licences? Bank accounts?

        Then you are probably not defacto. It is possible that a lawyer could argue otherwise since you still live together. I've heard of case where a couple lived in the same house for 3 days a week and were ruled defacto even though they both had their own house.

        You might not have kids now but as soon as you do then things are much more complicated.

        • Big Bad Bagheera on 04/01/2017 - 15:17

          Yes formal mail and ID's are listed separately, therefore like speculated most likely not formally defacto.

          How would defacto/not defacto relationship status change things?

        • Hellfire on 04/01/2017 - 16:38

          @Big Bad Bagheera:

          Defacto couples have a claim on assets regardless of who actually owns them. It's not a default 50/50 although it will tend to that over the long term.

          Eg. If you were together for 4 years as a defacto then your partner would be entitled to more than she put into the house. The exact amount would be determined in mediation or via the courts. After 20 years she'd probably be entitled to 50% of the total asset pool.

          Marriage basically works the same way as well except that people tend to become defacto before they realise it.

  • Skramit on 04/01/2017 - 10:50
    +2

    If you both contributed roughly 50/50 financially to the purchase, then it's fairly simple if it does go sour.

    If it's more like 70/30 or 80/20 and you want to protect yourself, then get it in writing. Speak to a lawyer about your options (but speak to your partner first!!!).

    But also consider if it's worth the hassle and potential argument….. I was in this situation when we bought our house with my now wife before we were married, but I considered that mine and her happiness/sanity/trust was more important than money so we didn't worry about any legal documents or a prenup when we married. I think my wife trusted/loved me more for that fact that I didn't care one bit about "protecting myself". So consider that…. :P

    "It's only money" was my approach, but this doesn't work for everyone…. :)

    • Big Bad Bagheera on 04/01/2017 - 11:26

      Thanks for the insight,

      I think I / we are in a very similar mindset to you.
      I don't think its worth the happiness/sanity/trust potentially lost by bringing formal legal documentation into it.

      Given our current age and career difference it would likely be a difference of 70/30 maybe 65/35.

      The approach I'm leaning towards here is have a talk "what will we do if it goes sour" and in the interim set up a spreadsheet and track our contributions at least for the first year or two. \

      and yes, at the end of the day it is only money :)

      • Skramit on 04/01/2017 - 11:40

        I also hadn't factored in (at the time) that her parents (both lawyers) were concerned about protecting her if it didn't work out. I found out later they were stressing that we didn't have any sort of agreement as we were unmarried - despite the fact that they knew I was contributing more. (Go figure). Just saying…. keep in mind family concerns as well, especially as you mentioned your parents would be guarantors on the loan.

        in the interim set up a spreadsheet and track our contributions at least for the first year or two.

        Be careful of the message this might send though. perhaps you may as well have a lawyered up document if you're going to do this. I mean you could always disguise it as a budget but be very careful. I see this approach as a very slippery slope to an argument :) I reckon a half arsed tracking is worse than a formal approach as it can be judged in the wrong way too easily. Tread carefully buddy!

        • Big Bad Bagheera on 04/01/2017 - 11:51

          I think both our parents are probably more or less thinking about it to some degree in the back of their minds.
          Fortunately neither parents are lawyers and her parents have been pretty involved with the process thus far. Looking at properties with us, giving contacts and recommendations about mortgage brokers etc.

          They have had great success in property investment and bought into the market at an even younger age than we are now (21 & 19, the magic of the 70's/ 80's housing market) and are very encouraging of our plans.

          Thanks for the advice on a spreadsheet and how it may be perceived by the other half, definitely gives food for thought as to the best approach with this.

        • Skramit on 04/01/2017 - 12:00

          @Big Bad Bagheera:
          Having the parents on board is half the battle :D

          Good luck!

  • apple2016 on 04/01/2017 - 10:56
    +3

    My partner and I have been together for 4 years, are very happy together and have absolutely no current or foreseeable future reason to be breaking up.

    Not having reason to break up is not the reason people stay together!…

    • Big Bad Bagheera on 04/01/2017 - 11:26

      we have plenty of reasons to stay together and grow our relationship but didn't think it was necessary to bore OZB with them :)

      • apple2016 on 04/01/2017 - 11:38

        If you do then also add the house as one more reason. Wish you the best.

  • Ryanek on 04/01/2017 - 11:24
    +4

    Highly recommend you consult a lawyer who can draw up a co-purchase agreement which will protect you both.

    • Dibbers on 05/01/2017 - 10:10

      Totally agree!!!!Personally know of three coyples who have done this and regretted it and it turned sour . You really don't know what the other person it all about until you go thru this . You seriously need to consider this !

  • Gravy on 04/01/2017 - 12:56

    I have a relative who is going through a divorce at the moment and one party is asking for 60% of the assets… the reason they cite is due to their future earning potential being less than the other party, perhaps as a result of not being able to further their career during the child rearing years, this was proposed by their lawyer.

    As possible defactos, it's perhaps important to consider this as a possibility (although children likely made a big difference in that scenario).

  • tommyben on 04/01/2017 - 13:57

    read / seek advice on tenancy in common on purchase contracts.

  • [Deactivated] on 04/01/2017 - 14:18

    Speaking as credit advisers who have seen countless transactions with young de facto couples buying together, a binding financial agreement is commonly proposed/recommended by legal pundits because it is both a legally useful document and a logically good process to engage in (because it makes each party aware of their rights and responsibilities in a variety of circumstances).

    NB: The link embedded merely provides a neat breakdown - you should probably Google that term for other good info (there is plenty of free info on the web about this topic).

    PS Not financial or legal advice/usual disclaimers apply. Merely a general observation of our team.

    Hope this helps.

    • Big Bad Bagheera on 04/01/2017 - 15:18
      +1

      Thanks for this, certainly provides a good direction in which to further my research.

      Cheers

      • [Deactivated] on 04/01/2017 - 18:16

        You're most welcome. Best of luck with it all. Hopefully everything goes smoothly for you and your partner :)

  • try2bhelpful on 04/01/2017 - 20:39
    +1

    The best way is to sit down and be honest with each other as to what you want to do with the house if it all goes pear shaped. You indicate you would buy out the other person, but given how the housing market is she may want to buy you out because the house has appreciated and getting another one is difficult.

    My other half and I have never bothered to get married and we have been together over 36 years; including buying a couple of houses together. Honesty and respect are the most important elements in any relationship. Be kind to each other and best of luck.

    • bumblebeetuna on 05/01/2017 - 11:25

      OP, this is your only way. The worst case scenario is probably even worse that you are imagining - i could tell you a story! My wife and i bought before we were married. We didn't discuss this subject when we bought, but we saw a bad case up close (it's still going after several years!) and we are in mutual agreement we would never let anything similar happen to us.

      It's OK to seek advice elsewhere, but instead of writing here, you need to be discussing the topic with your other half. You both need to be on the same page from the start.

  • ggkfc on 05/01/2017 - 10:12

    Recipe for disaster!

  • WT on 05/01/2017 - 11:21
    +1

    If you do it, go 50/50, dont over spend so it goes 60/40 or whatever. Its your first home so it wont really matter much. Play your cards right and if you rent it for 18 months, live in it for 6-12months you can decide to upgrade then.

    When your solicitor does the paperwork, he can draft up something quick, cheap and easy that will hold up in court. Ours did it included in his fees free of charge. It was basically 3 paragraphs. I dont even know where it is now. Its not for your protection only, its for both parties. You are both young and anything can happen, heck people separate after 30 years! You have not lived together etc etc.

  • malone63 on 05/01/2017 - 12:55

    I wouldn't do it..
    This whole thread with regard to your question gives you many reasons not to.

    Yeah you say, everthing's hunky dory however things could change at a drop of a hat.

    Good luck and don't be stupid.

  • ozbjunkie on 05/01/2017 - 17:21

    Mate, worst that could happen is that you end up paying for more than half, then she gets pregnant, so ends up 100/0. Then she never goes back to work, even though she always said she would. Then in 10 years you break up and she gets 80% and part of your super, along with child support, and you can go live with your folks or in a bedsit once her new boyfriend moves in.

    That's about the worst than can happen. And it's not a long shot.

  • Oz80085 on 15/01/2017 - 06:20

    Unless you're both even stevens going in to it, I wouldn't even consider it. I'm guessing here, but it sounds like you would be doing the heavy lifting financially..? In which case, why not go it alone? She can still live with you, maybe pay some "rent" in cash.

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