The upside of co-buying a property
One of the major reasons behind co-buying a property with a partner is to gain access to greater finance in order to afford the home of your dreams. Financial institutions will use your combined income to determine affordability, giving couples a better chance of bond approval for the desired amount.
While this is the primary benefit associated with going into a property purchase with a partner, there are other up sides such as sharing in an exciting and momentous step together.
The potential risks
As with most big life decisions, there are always risks that go hand-in-hand with the benefits and a property purchase is no exception.
It’s important to consider these potential risks carefully before diving into a joint property purchase. For example, the financial stability of both parties needs to be considered. Should one of the partners find himself or herself in financial difficulties, it can have severe consequences for both parties, including the risk of forfeiting the property if repayments are not made on time.
In addition, there is also the risk of a couple breaking up, and without a marriage or antenuptial contract to facilitate the dissolution of a joint estate, there can be unpleasant disputes.
Managing the risk
The best way to preempt and avoid any unforeseen and unpleasant consequences is for the two parties purchasing property together to enter into a written agreement. This contract should stipulate all relevant details relating to the property agreed by the partners, including who will be responsible for mortgage payments (and in what amounts), rates payments, levies, water and electricity costs, and general maintenance of the property.
It is worth noting, however, that while this agreement will be in force, both parties will remain liable jointly and severally to various institutions who have a financial interest in the property (e.g. a bank for the mortgage amount or a municipality for rates).
As such, both parties should take great care in ensuring all matters relating to the property are always in order and up to date.
It is also advisable to consult with a legal professional to assist in drawing up an appropriate co-ownership agreement prior to purchasing a property.
Written by Wessel de Kock