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

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

Be open about your finances

One piece of advice from almost all the experts we spoke to was to start the home buying process with a candid conversation about your finances.

“Before you buy with a partner or group, sit down and talk openly about your respective finances,” says Sophia Guy-White, co-founder of mortgage lender Generation Home. “The reality is that individuals rarely have the same financial situation and make an equal contribution.”

This can become even more complicated if a person’s parents contribute, for example, to the security deposit for the new home.

They also need to be involved in these conversations so that everyone is on the same page about where the money is coming from and what they are expected to contribute towards the property purchase, ongoing mortgage payments and maintenance.

Sign a statement of trust

It is important to document all the money spent on the house to avoid arguing over who paid what in case the relationship breaks down

If joint property buyers don’t contribute equally to the down payment or mortgage payments, it’s a good idea to sign a trust statement. Also known as a deed of trust, this is a legal document prepared by a lawyer. It describes how equity would be divided if the property were to be sold or remortgaged in the future to remove a party from the deeds.

Marilyn Bell, partner and head of the family law team at SA Law, says, “It can provide for a certain amount or percentage that is paid to the larger contributing party first before the rest is divided equally.”

In the event of a divorce, the judge does have the power to make a different decision than stated in the statement of trust. However, Bell says it’s still “worth doing,” as the document can be used as evidence in such cases.

It can be especially helpful if a party’s parents donate or borrow some money for their down payment, to avoid future disputes over whether their ex-partner should pay them back.

Homeowners should ensure that the trust statement is updated if a party is going to contribute more or less to the cost of the house, or if a lot of money is being spent on the property, such as building an extension.

Keep track of who pays what

By making payments to your home from different bank accounts, you can avoid arguing over who paid what, in case a relationship breaks down later.

It may not feel particularly romantic, but it’s also a good idea for each member of a couple to pay their share of the home-related expenses from their own bank account, rather than transferring it to the other partner so they can pay the full amount. can afford.

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

Bell says, “It’s always worth documenting purchase and mortgage contributions in a simple way.

For example, each party can pay the transfer attorney from their own bank account. They don’t have to cloud the water by transferring it from one to another before the recipient pays the lawyer.”

You can’t make your house completely ‘divorce-proof’

While the above are all helpful steps to take, many of them rely to some degree on a relatively amicable breakup.

“These remedies are unlikely to withstand a bitter divorce in court, especially if children are involved,” said Scott Taylor-Barr, financial advisor at Carl Summers Financial Services.

And whatever steps you take to divide your property, your mortgage lender will still view everyone named on the mortgage as co-responsible – meaning if one partner doesn’t pay, the other will be forced to do so or be at risk or to harm her partner. creditworthiness.

“Lenders have lent out mortgages on a joint and several liability basis for many, many years — meaning that all parties to the mortgage are 100 percent responsible, not just what they see as their ‘share,'” Taylor-Barr adds.

“A party cannot be released from their obligations under the mortgage unless the lender agrees to release them. No amount of paperwork between the borrowers can change this.”