Things You Need To Consider Before Buying a Property With Your Partner - Part 2 of 4
Tuesday Apr 27th, 2021
Some tough but real conversations couples should have before getting married and/or buying a property together
In the Netflix series Marriage or Mortgage, a number of engaged couples are profiled as they decide between a dream wedding or a dream home. However even before you consider buying a property with your partner, there are certain conversations that you need to have.
If you are moving in together for the first time, consider making a budget together. There should be some cost savings if you are sharing in the expenses but be sure to understand what your financial goals are. If your goal is to buy a home together, make that the priority. If your goal is to throw a wedding celebration, allocate your savings towards that. Setting spending limits and savings expectations will help you reach your goals. Seek the help of a financial planner if you need to, to help mediate some of these challenging and sometimes awkward discussions and decisions.
This involves a real conversation about incomes and expenses, as well as expectations on how things will be handled in the future. Are either one of you bringing debt into the relationship/marriage? If so, how is that being handled? Are either one of you bringing in assets, like an investment property or family inheritance? How are each of your credit scores? Do either one of you have savings? Retirement savings? Emergency Fund? Life insurance? Who is providing the downpayment for a property purchase (or wedding)?
It would be unusual for couples to be exactly on the same page and same financial status as one another. Simple decisions like whether to combine bank accounts or who pays the hydro bill can initiate arguments. One might feel that there's nothing wrong with going out every weekend with friends to the trendiest restaurants, while the other would rather save towards globe-trotting vacations. So make sure you have a plan in place before you consider buying a property together.
DECIDING ON A WANT-LIST
Often times, our job requires us to find a happy medium between what each side of the couple wants. However couples should decide on what their priorities are before embarking on a property search. Do they see themselves living in a condo downtown? Are they hoping for a new construction home in a new subdivision somewhere else in the GTA? Do one or both of them want to be close to work? How are either of you going to commute to work? Do you want/need to be close to family and whose family?
There may be some compromise needed in terms of location, or if must-haves need to include a man-cave or extra-large walk-in closet, but being focussed and realistic about what you'll be able to afford will make the home buying search easier.
CLIMBING THE PROPERTY LADDER
With today's property prices in the GTA, home ownership may feel out of reach for some. However, couples should consider teaming up on the goal of climbing the property ladder. If looking at a property purchase as an investment for their future and their family's future, the key is to get into the real estate market ASAP, by starting small and moving up.
Whether purchasing a smaller condo, buying outside the GTA, pooling your funds with another buyer (ie. 2 couples buying a duplex), or sharing space (ie. a 2-unit home where you live in one unit and rent out the other) - these are all ways to get into the market now, build equity and appreciation, and then upgrade/upsize when the timing is right. The next move could get you into a more optimal location, or might be 100% exclusively yours, or may be larger in size to accommodate a new baby-on-the-way. Yet another move after that might be an upgrade in size to house an expanding family, or a change in location to be closer to a new job or closer to family. With each move, the property's equity and appreciation should help to fund the expansion up the property ladder.
Couples should not shy away from buying a property together because they don't think they can afford to - they should figure out a way to make it work, even if it's not their "dream home". This future-focused plan/strategy may not be for everyone so it is definitely a good idea to discuss this with your significant other, to ensure they are on board with what may feel like a short term downgrade or inconvenience, for long term gain.
HELP FROM PARENTS and LEGAL CONSIDERATIONS
If your parents are helping with the home purchase, are they going to be on title? How does your future spouse feel about that? How do parents protect themselves from losing "gifts" they have given to their kids to purchase property, should the marriage end in divorce? If one or both of the couple own property prior to getting married, should the couple consider a pre-nup? If one is contributing more towards the downpayment than the other, are both of them okay with that?
In Ontario, Family Law mandates that the matrimonial home be split 50/50 in the case of a marital breakdown. so regardless of who funds the downpayment, upon divorce, the home may be sold and the proceeds divided 50/50. If this is not your wish, you should consider a pre-nuptial agreement to identify considerations for family property, or assets brought into the relationship, etc.
So again, this is important to discuss prior to purchasing a property together, as family involvement may not always be welcome on both sides of a relationship. Also, while no one enters into a marriage with divorce in mind, it is important to understand what happens to the property you are buying together as your matrimonial home/principal residence, if things don't work out.
Whether you decide to find a home to build your family in or plan a special day for your nuptials, take the time to discuss these matters. It's definitely not as fun as touring homes for sale or doing menu-tastings for your reception dinner options, but definitely a necessary exercise in communication and compromise that all couples should do.
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