While the home buying struggles of unmarried couples are well-known, the process is not straight forward for married couples either. After tying the knot, many newlyweds look forward to buying a home together. But before you start scanning property listings and searching for the perfect bathroom suite, make sure you sit down together and ask each other these house buying questions.
What is your financial history and credit rating?
At the start of a relationship, couples talk all the time, from music to travel and everything in between. However, as a married couple you should have a serious conversation about your finances and credit scores.
While some couples will have already discussed their credit scores, others consider it a taboo topic of discussion. If one person has a credit score that is significantly lower than their partners, it could affect the couple’s chances of securing a mortgage to buy a property, or at a minimum affect the ability to get an appealing interest rate on a loan.
Discussing your credit scores with each other before arranging to meet with a mortgage lender is vital. By knowing your credit rating you have the chance to work on repairing any credit problems before you apply to get a mortgage. If you don’t know your credit score, you can contact your credit card company to see if you can access your score for free, or use an online credit check company.
Where do you want to live in a few years time and in the future?
The life goals you want to achieve will impact the type of property, and the mortgage, that is most suitable for you. If you plan to stay for a long time in a property, then a fixed interest rate 30 year mortgage may be for you, since it ensures that your interest and monthly payments will be consistent throughout the length of your loan.
If, however, you plan on moving again within a reasonably short amount of time, to buy a bigger property for starting a family – then a fixed rate mortgage may not be the most suitable. A better option may be an adjustable rate mortgage that offers a lower rate of interest than a fixed rate mortgage for a preliminary length of time, possibly up to 7 years. After the initial period of time has passed, the interest rate can fluctuate up and down as a result of market indexes.
Will one of you be a stay at home parent?
After tying the knot, you may not want to rush into starting a family, so why the need to have a discussion about kids? Because having children will drastically affect your income as a couple, which is crucial for establishing how much you can afford on a property. A good rule to follow: don’t have mortgage expenses that account for over 30 percent of your take home income.
Remember that you may be making mortgage payments for up to 30 years, so you should not only consider your current income, but your anticipated future income. What happens when/if you have children and one of you decides to leave work to look after the kids at home?
Your family income could be reduced by half. So when you are estimating how large of a mortgage you need, it is best to be cautious. Just because you are eligible for a $1 million loan, it doesn’t mean you should go out and buy a $1 million property.
What happens to the property if your marriage breaks down?
Although you may be a happy, recently married, pair of love birds, you should discuss the potential future conclusion of your marriage, through divorce or death. If either, unfortunately, occurs you will need to know how to separate your assets.
When buying a property as a married couple, you have several home ownership options. Joint tenancy is the most common type of ownership with spouses. Each partner holds an equal share in the property. If one of the couple dies, the deceased’s share of the property is passed on automatically to the surviving spouse.
Tenancy in common is another option, with its transferable interest in the property, which may be a more suitable form of home-ownership. If one person is contributing a larger initial down payment or paying the majority of the mortgage payments, they can protect their investment in the event of divorce.