When you’re buying a home with a partner, thinking about the relationship breaking down is the last thing on your mind. However, it’s important to think about protecting yourself and ensuring assets would be divided fairly.
Having a conversation with your partner about what would happen if you were to break up can be difficult. But tackling challenging “what if” questions can give you more confidence and ensure you’re both on the same page as you take this next step.
According to data from Zoopla, 68% of Brits who buy a property with their partner risk losing tens of thousands of pounds by not protecting their share of the purchase.
More than a quarter of people who bought a home with a partner and then split up claim the proceeds of the sale were not split fairly.
85% say buying property is as big a commitment as marriage but many aren’t protecting their wealth
Despite 85% of people viewing buying a home as big a commitment as marriage, the findings suggest that many aren’t taking steps to secure their assets.
In some cases, partners may equally contribute to buying a home, which can make it easier to divide assets if a relationship breaks down. But it’s still not always straightforward.
44% of buyers said they haven’t taken steps to protect themselves because they assume they’d automatically receive a fair share after paying half of the costs. Yet, they may not receive 50% of the property, especially if children are involved.
There are many other reasons why you may not want to split property wealth equally.
One partner may contribute more to the deposit or pay a larger share of the monthly repayments. This can cause conflict when deciding how to split property wealth.
In addition, more couples than ever are relying on family support to buy a home, and discussing how this would affect splitting assets is important.
As well as a lack of awareness, 1 in 10 people admitted that having a conversation about potentially breaking up would be too awkward.
Even when couples discuss the issue, it’s often an informal agreement that’s reached. It’s important to remember that feelings can change and that an informal agreement wouldn’t hold up in law.
So, if you’re buying a property with a partner, what are your options?
3 options to consider if you’re buying a home with a partner
1. Have a deed of trust or cohabitation agreement in place
Among couples that have taken steps to protect their stake in a property, a deed of trust or cohabitation agreement is the most common option – 15% of couples have used this.
Both of these options are legal agreements that let you specify how a property is held between joint owners. This includes whether it’s split 50/50 or some other way to reflect your circumstances. For instance, an agreement may state that one partner is entitled to a larger share as they provided the property deposit.
These agreements can also be used if couples are cohabiting but only one person owns the property. So, if you own your home and a partner moves in at a later date, the agreements could be used to ensure your partner wouldn’t have a claim on your home.
2. Set out a floating deed
A floating deed, also known as a “commensurate share deed”, is legally binding and records the financial arrangement between joint owners. This means that if the property is sold, it’s clear what proportion of the proceeds each party is entitled to.
It can help avoid disagreements and miscommunication as it can provide an accurate way to assess and record each person’s interest in the property.
This option is used by 10% of couples.
3. Create a prenuptial agreement
The Zoopla research found that 7% of couples had considered property as part of a prenuptial agreement, also known as a “prenup”.
A prenup is a legal agreement that sets out how assets would be divided between a couple if they divorce. As a result, it’s an option if you’re planning to get married.
Parents that are helping children step onto the property ladder are increasingly demanding prenups, according to an FTAdviser report. This arrangement could mean that a gifted deposit would remain within the family if a couple split up.
UK law related to prenups is complex and it’s important it’s legally sound to provide you with the protection you want. So, seeking legal advice can be beneficial.
Contact us to talk about your mortgage needs
Whether you’re buying a home alone or with a partner, understanding your financial commitments and which mortgage is right for you is important. We can help you find a mortgage lender that’s right for you and answer questions you may have about the application process. Please contact us to discuss your needs.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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