Kirsty McLuckie: trouble in paradise when buying a home together
With Valentine’s Day being celebrated this coming week, Cupid’s arrows are flying. It is a popular time of year to get engaged, but most 21st-Century couples live together before getting married, and many of those will jointly buy a home well before making their way down the aisle.
Perhaps you could say that these days it is less love and marriage, more love and mortgage that go together.
If your significant other hits you with a proposal this week – to hitch your names together on a set of deeds – what are the vital things to find out first?
Firstly, just as some American States used to require a health check on both parties before a marriage licence was issued, nowadays it is a good idea to check your beloved’s financial hygiene.
You may have a squeaky clean credit score, honed over years of paying bills on time, but if your intended bidey-in has not been so stringent and has managed to rack up late fees on plastic, or worse, a court judgement against them, the likelihood of you being offered a mortgage together –or even a property tenancy – can be severely hampered.
Now is also a good time to discuss savings too. Having a GSOH is one way to attract a mate, but when things get serious, a LISA is a much more enticing abbreviation.
These Lifetime Individual Savings Accounts can be opened by anyone aged between 18 and 39. You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000, or for retirement, and the state adds a bonus of up to £1,000 a year on top, which – if you are saving long enough – goes to a maximum of £33,000 extra, each.
You can use your LISA savings as a deposit to buy your first home with someone else, regardless of whether they have their own LISA. And, if you both have them, you can combine the two towards your home.
Which brings us to discussing past relationships. While couples may confess the number of ex-girlfriends or boyfriends that didn’t make the grade to one another, the crucial question regarding a property purchase is: have you done it before?
If you or your partner is not a first-time buyer, there will be consequences.
According to HMRC, to be classed as a first-time buyer, you “must not, either alone or with others, have previously acquired an interest in a dwelling or land situated anywhere in the world”. So if you’ve owned a home in the past, but sold it, you do not count as a first-time buyer. Even if you’ve inherited a home instead of buying one, you also will not be classed as a first-time buyer.
It is important, not just for LISAs but because as a first-timer there is extra relief in the Land and Buildings Transaction Tax, which usually is chargeable over the first £145,000 of a property’s value. For first-time buyers, this sum is £175,000.
Finally, it might be the start of a lifelong love, but removing the rose-coloured specs for a second, and remember there is a chance that things might not work out.
For unmarried couples buying together, it is a good idea to ask your solicitor to draw up a Minute of Agreement for the purchase to avoid pitfalls in the future. It can cover how costs are to be managed, who is allowed to reside in the property and perhaps, most importantly, if the property has to be sold how that will be managed.
It is hardly romantic, but such trifles can make the course of true love run much more smoothly.
- Kirsty McLuckie is property editor at The Scotsman.
Want to join the conversation? Please or to comment on this article.