Advice on buying a property with a partner who has a smaller deposit

anyotheruser

Hi, I am currently a sole home owner and am looking at getting a property with my partner/significant other (SO). We are not married and am not sure where life will take us, but either way I want to be extremely careful from a financial perspective.

If we get a property it would likely be as 'Tenants in Common'.

Our current financial status means the breakdown of a new property purchase would be:

• 55% deposit from me
• 5% deposit from my SO
• 40% mortgage (mortgage arranged with my income only, as SO has no fixed income)

My questions are:

1. Is there any risk of the mortgage only being in my name, when my SO has a 5% share or the property? I would expect my SO to pay 5% of the mortgage fees, but assume she couldn't be legally responsible for the mortgage without a fixed income (am I correct?)
   
2. Is there any disadvantage of the Tenant in Common approach later in life, particularly if we married? As I understand it, the percentage shares in a 'Tenant in common' purchase will apply after marriage (am I correct?). Conversely if I purchased the property on my own (ie: without SO's 5% suggested above) and then we married, my SO would receive a 50% share by default if we split (am I correct?).

Thanks for any help. I guess the the dilemma I am facing is, is it better to 'go it along' with a potential loss of 50% of my property if we marry, or 'do it together' with a potential impact on my credit rating if things get messy.

jamesml

Can't help too much on the TIC point, but I'd be asking why you are doing it this way in the first place. Why don't you just buy the house yourself and charge her rent? Then you avoid the linked credit scores, avoid the issue of what happens if you marry/don't marry, don't need her on any deeds, etc etc etc. I think it would be a lot more straightforward to be completely honest! Do you need her 5% to make the whole thing work?

Mojisola

Lots of good information here - https://www.advicenow.org.uk/living-together/

I agree with jamesml - until you're sure where the relationship is going, why not buy the house in your name?

Just be aware that a partner can gain a "beneficial interest" in the property if they put money into improvements or pay towards the mortgage even if their name isn't on the deeds.

anyotheruser

Really appreciate the replies, thanks! Agree with your points, but on Mojisola's point: wouldn't a known percentage share (say 5%) of 'Tenants in Common' be better than a unknown (and decided by the courts) share of 'beneficial interest'?

ACG

The mortgage can not be in your name only if the property is jointly owned, it would need to be a joint application even if your putting her income down as £0.

BitterAndTwisted

If you are happy to put in that 55% deposit and your partner their 5% what you could look into is a Deed of Trust which would protect both of your initial cash contributions should the relationship end at some point in the future.

So, at the end each of you get the precise sums you put in originally and any equity gained is shared 50/50. This presupposes that you both make equal mortgage-payments throughout or agree to share the equity if you did not.

There are any number of ways to skin this particular cat.

xylophone

Why take this step if you are not committed enough to marry? You might just as well live together in your existing property until you know where you are?

AndyGuil

Tenants in common and deed of trust is the standard route.

pcgtron

Surely when / if you get married all of that goes out the window and more of a 50.50 split occurs. If you have kids then even more ao

anyotheruser

Thanks for the replies everyone, this has really helped a lot.

@BitterAndTwisted thanks, I understand now how Tenant in Common and a Deed of Trust work together. If anyone wants more info there is some info within thread "14262337&postcount=5" [sorry, I can't post links]. For what it's worth it seems the final withdrawal amount can be based on what's in the Deed of Trust.

@ACG thanks for clarifying the mortgage is in both our names. Interestingly, using the Halifax mortgage calculator resulted in me being able to borrow 50% more on my own than with my SO listed as a second applicant with zero income.


It's interesting that this thread has attracted comments about morality/ethics etc. I would love to entertain those, but I feel it's more useful for everyone to only consider the legal aspect and not the emotional.

@pcgtron from a legal perspective, the way I read things, being a Tenant in Common along with a Deed of Trust would not [automatically] change after marriage. Could anyone clarify I am correct?

BitterAndTwisted

This is the sort of question you should be asking of the solicitor who will draw up the Deed of Trust for you both.

In the meantime a frank discussion about all of the possible outcomes should take place between you beforehand.