Purchasing a home is a significant milestone in life, and your marital status can have an impact on the process. Whether you’re married, civil partnered, single, or living with a partner, there are essential factors to consider before diving into homeownership.
Legal Ownership
When you buy a property with another person there are two different ways that you can legal own the property:
Joint Tenancy: This type of ownership means that you and your joint owner both own the entirety of the property rather than any distinct share in the same. Importantly, under this type of ownership, if one of you were to die, the survivor would automatically own the entirety of the property, regardless of what may be said in someone’s Will.
Tenancy in Common: With this type of ownership, you and your joint owner, each own distinct shares in the property, these can be equal or unequal shares. If one co-owner dies, their share is distributed according to their Will or the intestacy rules if they die without a Will.
When you are married or in a civil partnership it is important to note that whilst you are still able to own property as tenants in common, if your relationship breaks down the declaration you have made about your ownership of the property is not determinative. On divorce/dissolution of a civil partnership, the Family Court has the ability to go beyond the strict legal ownership of property and determine that something else should happen to ensure that going forward everyone can continue to have a roof over their heads. This can include transferring property to one person (whether this was owned jointly or solely by the other), selling the property and dividing up the proceeds of sale or enforcing that the property be retained for a set period of time before then being sold.
In stark contrast, when you co-own property but are not married or in a civil partnership, the declarations about ownership that you make when you purchase the property will determine how that property is the dealt with in the event of death or a breakdown of your relationship. This can lead to huge discrepancies between what happens to two seemingly identical couples who simply have different marital statuses.
Financial implications
Anyone seeking to purchase a property together will often combine their incomes when applying for a mortgage, which can increase their purchasing power and qualify for better interest rates. Traditionally, however, lenders have viewed married couples and those in civil partnerships as more financially stable, which can improve their chances of loan approval and can lead to preferential interest rates.
For all co-owners it’s crucial to review their credit scores and financial history, as any outstanding debts or low credit scores can impact the mortgage application. If one person has a significantly better credit score or lower debt-to-income ratio, it may be advantageous to apply for the mortgage in their name alone. If this is done and the relationship then breaks down, if you are married or civil partnered there is protection for you within the financial claims that can be made, but if you are not it may be very difficult to evidence the intention for the property to be enjoyed by both of you to the extent that you should have a legal interest in the same.
Tax Benefits
While tax laws do not offer specific tax benefits to married couples for mortgage interest or capital gains, some couples may benefit from the Marriage Allowance, which allows one spouse to transfer a portion of their personal allowance to their partner, reducing their overall tax burden (this equally applies to Civil Partners).
Estate Planning
Married couples and those in Civil Partnerships should consider their estate planning when purchasing a home. As mentioned earlier, the type of ownership can impact how the property is distributed upon the death of one spouse/civil partner. Proper estate planning ensures that your wishes are carried out and can help minimise potential tax liabilities.
Decision-Making Process
One of the significant differences in buying a house when married or in a civil partnership is the decision-making process. Couples must work together to find a home that meets both of their needs and preferences, which may require compromise and effective communication. Additionally, both must agree on the financial implications of homeownership, such as budget, monthly mortgage payments, and ongoing running costs.
Conclusion
While buying a house as a married couple or in a civil partnership can offer several advantages, such as increased purchasing power, it’s essential to understand the legal, financial, and emotional aspects of homeownership. By working together and considering the unique factors that come with being married or in a civil partnership, couples can navigate the home-buying process more effectively and build a solid foundation for their future together.
Talk to us:
If you’d like tailored advice on property ownership, relationship breakdowns, or estate planning, our experienced team is here to help, please do not hesitate to contact us.
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