How to Buy a Home as a Couple?
Are you ready to take the next step in your relationship and buy your first home as a couple? If so, such a project can appear very exciting on paper, but it generally also comes with its share of hoops and hurdles. No matter the intensity and depth of the love you share, reality can be slightly less glamorous than what you might have expected.
Indeed, when buying a home with a partner, it isn’t all rainbows and unicorns. You will need to prepare yourselves for a few complicated, heated conversations, and be ready to compromise. You will also need to anticipate the worst that could happen (like unexpected job loss or a change in your financial situation). In other words, to successfully buy a home as a couple, the key is to communicate and anticipate.
To help you find your new love nest and make sure things run as smoothly as possible, we put together these five steps to buy a home as a couple:
- Set a budget (and get pre-approved for a loan)
- Know (and agree on) what you want
- House hunt with a plan
- Make the right offer to secure your dream home
- Protect your future (and prepare for the worst)
1. Set a budget (and get pre-approved for a loan)
Before you even discuss what your dream house might look like, you need to figure out what you can afford. How much deposit have you saved? How much can you borrow from the bank and under what conditions? Can you benefit from grants like the KiwiSaver HomeStart grant for first home buyers?
When doing the maths and writing your figures down, try to be realistic or even conservative. The aim is to come up with a budget that will allow you to enjoy the same lifestyle, but without putting too much mortgage pressure on your shoulders, and on your relationship. A general rule is to make sure that repayments won’t exceed 28-30% of your take-home pay.
A common mistake is to forget the hidden costs that come with the purchase of a home, such as loan fees, insurance, etc. Don’t hesitate to seek professional advice to make sure your budget is comprehensive and accurate. An accountant or a financial advisor will be able to set up a plan and structure a budget that will suit your situation and desired outcome.
The budgeting phase is also the time when you want to try to get pre-approved for a home loan. Not only will it give you a precise idea of how much you can borrow, but it will also make you a stronger candidate when the time comes to make an offer.
2. Know (and agree on) what you want
Now that you have a set budget and, therefore, a better idea of what you can afford, the fun part can begin. But before you start hunting for the house of your dreams, you will need to know and agree on what exactly you are looking for. Couples often believe they are on the same page but then realise once they start the visits that this is far from being the case.
To avoid unnecessary tension, try to answer all the questions you can think of when looking for a home. For example:
- What areas are we happy to target?
- How far from work can it be?
- How many bedrooms do we need?
- Are we ready to dedicate some time and effort to renovate or do we need a place ready to move in?
- Are we happy to start small and upsize later if required?
A good way to get a better idea of what each one expects is to both write down your list of “must-haves” and “good-to-haves”. Also, make a list of any potential deal-breakers. For example, you might not want a ground floor; you can’t be more than 10 minutes walk from a bus or train stop; there can’t be too much traffic at night, etc.
Once your key features are on paper, compare your lists and be ready to compromise. You might realise that your definition of a “dream house” is far from what your partner envisions. Therefore, you both may need to sacrifice some of the features listed in your respective wishlists. Together, determine what is mandatory and what would be great to have.
A real estate agent can help you with the task of defining your dream house, while making sure that what you wish for is realistic, both in terms of features or budget. He/she can also act as a mediator to help you get on the same page. However, even with some help, it might take you a few visits before really figuring out what you are looking for.
3. House hunt with a plan
House hunting can be as exciting as it can be depressing. Competition can be harsh, making finding and securing your dream home a real challenge. So be ready to embark on an emotional roller-coaster.
But that’s not it. More than likely, it will take you a few tries before you find a home for which you might think about making an offer. For this reason, house hunting can also become very time-consuming. This is why you need to have a precise plan and stick to it.
When doing your research, set up alerts on real estate apps and websites, and register your interest with your local Harveys real estate agent to be notified when something meeting your criteria comes up on the market. You will save some precious time and energy by narrowing down your selection as much as you can. Focus on homes that meet all your must-haves and pay attention to your deal-breakers, no matter how great the place might seem otherwise.
Every time you inspect a new place, take notes, photos and videos. Write down the pros and cons and set a benchmark. Always compare the last home you visited with your “favourite one so far”, and try to keep a cool head when debriefing. It doesn’t mean you can’t have a crush on a place and trust your guts if you believe you found THE one. On the contrary, following these pieces of advice should only give you more clarity and confirm your feeling about your potential future home.
4. Make the right offer to secure your dream home
You finally found your dream home and feel ready to take the plunge and make an offer. Most likely, you will either buy by private treaty sale or at auction. But how do you give yourselves the best chance to secure your new love nest?
If you’re buying by private treaty, coming up with an offer can sometimes be tricky. You will need to figure out if the price asked for the property seems fair, and agree on how much you are willing to offer. Depending on the competition, on the information you managed to gather about the seller, and on how much you want this home, you might want to try to seal the deal and make your best offer straight away. This will limit the risk of losing the property to another buyer.
If there’s an auction, you will need to agree on your absolute limit and strictly stick to it. Remember that by investing in a home together, you are trying to build a future, not jeopardise it. That is why it is crucial to look at every detail before the day, so you can remain calm and level-headed when auction day comes. The better you prepare, the less likely you are to get carried away and spend more than agreed. Also, make sure that your finances are in order and that the deposit can be available as soon as the hammer falls. If you happen to win the bidding battle, you will be required to pay the deposit on the day. This usually represents 10% of the sale.
No matter the type of sale, do not hesitate to discuss your strategy and rely on your local Harveys real estate agent to help you secure the house of your dreams.
5. Protect your future (and prepare for the worst)
Sometimes, couples grow apart and split up. But that’s not it. Even if it’s not as fun as discussing how you will arrange and decorate your new home, you need to think about protecting your asset. Think about how things should work if you become (temporarily) unable to pay your mortgage back: separation, redundancy, loss of job, illness or even death. For all these reasons, it is crucial for unmarried couples to address any potential hiccups they could face down the track. That means not only getting all the right insurances, but also putting everything in writing in a co-purchase agreement in case of a breakup.
Before getting into the legal aspect of things, start by taking care of all the insurances you need to protect both your home and each other. On top of that, also try to set aside a financial cushion for unforeseen expenses or circumstances. If you can, try to keep at least six months worth of mortgage repayments on a savings account, as this should give you enough time to find a solution if any issue arises.
You should also seek professional advice to prepare a co-ownership agreement, which will protect both of you if you were to go separate ways. This agreement will detail the structure of the property ownership (Joint Tenants or Tenants in Common) and the exit strategy. Note that in the absence of such an agreement, the law would assume that your purchase is a joint tenancy. This type of ownership gives each party listed an equal interest in the property and comes with a right of survivorship.