Buying a house with a partner? Take these steps to protect your finances if you split up

This is Money asked experts what couples, as well as friends or family who shop together, can do to make the process as smooth as possible if they no longer want to live together in the future.

Be open about your finances

Before making an offer on a house, have an honest discussion about what you can each afford and how the property and mortgage payments will be paid.

One piece of advice offered by nearly every expert we spoke to was to start the home-buying process with a frank discussion about your finances.

“Before you shop with a partner or group, sit down and talk openly about your respective finances,” says Sophia Guy-White, co-founder of first-time homebuyer mortgage lender Generation Home. “The reality is that people are rarely in identical financial situations and contribute equally.”

This can be further complicated when someone’s parents contribute to the deposit on the new house, for example.

They should also be included in these conversations, so everyone is on the same page about where the money is coming from and what they are expected to contribute to the purchase of the property, ongoing mortgage payments, and upkeep.

Sign a Statement of Trust

It's important to document any money spent on the house, to avoid arguments over who paid what in case the relationship falls apart.

It’s important to document any money spent on the house, to avoid arguments over who paid what in case the relationship falls apart.

If the jointly owned buyers do not contribute equal amounts to the deposit or mortgage payments, it is a good idea to sign a Declaration of Trust. Also known as a deed of trust, it is a legal document drawn up by an attorney. Sets out how any principal would be divided if the property were to be sold or remortgaged to remove one party from the deeds in the future.

Marilyn Bell, partner and head of the family law team at SA Law, says, “You can stipulate that a specific sum, or a percentage, be paid to the largest contributing party first before dividing the rest equally.”

In the case of a divorce, the court has the power to make an order other than the one specified in the Declaration of Trust. However, Bell says it’s still “worth doing it,” as the document can be used as evidence in such cases.

It can be especially helpful if the parents of one party are giving or lending a couple money for their deposit, to avoid future disputes over whether their ex should pay them back.

Homeowners should ensure that the Declaration of Trust is updated if one party begins to contribute more or less to the cost of the home, or if a lot of money is spent on the property, such as building an extension.

Keep track of who pays what

Making payments for your home from separate bank accounts can help avoid arguments over who paid what, in case a relationship breaks down later.

Making payments for your home from separate bank accounts can help avoid arguments over who paid what, in case a relationship breaks down later.

It might not feel especially romantic, but it’s also a good idea to have each member of a couple pay their share of the costs related to the home from their own bank account, rather than transferring it to the other member of the couple to pay in its entirety.

This creates a paper trail that can prevent disputes over who paid what if the relationship breaks down later.

Says Bell: ‘It always pays to document purchase and mortgage contributions in a simple way.

‘For example, each party can pay the transfer lawyer from their own bank account. They don’t have to muddy the waters by transferring it from one to the other before the beneficiary pays the attorney.

You can’t ‘divorce proof’ your house completely

While the above steps are all helpful, many of them depend to some degree on the breakup being relatively amicable.

“These legal remedies are unlikely to hold up in an acrimonious divorce, especially if children are involved,” says Scott Taylor-Barr, financial adviser at Carl Summers Financial Services.

These legal remedies are unlikely to withstand an acrimonious divorce in court, especially if children are involved.

Scott Taylor-Barr, Financial Advisor

Regardless of the steps you take to divide the ownership of your property, your mortgage lender will still treat anyone named on the mortgage as joint liability, which means that if one partner fails to pay, the other will be forced to or You will risk damaging your property. credit rating

“For many, many years, lenders have lent mortgages on a joint and several liability basis, which means that all parties to the mortgage are 100 percent responsible for it, not just what they see as their’ participation,'” adds Taylor-Barr.

‘A party cannot be released from its obligations under the mortgage unless the lender agrees to release them. No amount of red tape between borrowers can change this.’