What do cohabiting couples need to consider before buying a home?

There aren’t many things more exciting than buying a home with your partner.

If you’ve been living apart, or you have been saving up to have something you can call ‘yours’ for many years, it is a really exciting time as your new home purchase finally gets underway.

Before jumping into buying a property with your partner though, there are things to consider.

With more and more couples not getting married before buying a home now, the lines of how it all works have become a bit blurry.

The number of cohabiting couples applying for mortgages jumped 60% in 2020, and the numbers show no signs of slowing down in 2022.

So, if you and your partner are thinking of purchasing a property, take a few minutes to read this blog, and find out exactly what you need to do before making the leap.

To begin with, let’s start at the beginning.

What is a Common-Law Marriage? 

If a couple is married, both parties immediately gain rights to a home.

But what if they aren’t married and are simply partners who live together?

This is often referred to as a common-law marriage.

Despite the seriousness the name suggests, this isn’t anything legal and is simply a term used for cohabiting couples.

Unlike an actual marriage, a couple who are in a common-law marriage do not share rights to belongings, including property.

This means that if they bought a home together, things could get tricky in the future.

The Hazards of Cohabiting Couples Buying Together

Despite what many may believe, there is no law that entitles someone in a common-law marriage to part of a home.

Even if you have lived in a home together for decades, you could be only entitled to what your agreement states and to what your assets in the home are.

This can lead to a terrible situation if one party has the rights to the whole house and the other has to find somewhere new to live and the situation can often end up in court and with both parties paying hefty solicitors fees.

So why does this happen?

Well, relationships don’t always end on good terms.

When it comes down to it, if a cohabiting couple purchases a property together, they are probably going to both help with the financial aspects of living there. This includes bills and mortgage payments.

If one person moves out, do they then still have to pay?

What if someone wants to sell the house, but the other party doesn’t? By law, both signatures are needed to do the deal, so this is another situation that can be tricky to handle.

There are instances in which moving into a home with someone and helping out with payments does entitle you to certain things if a relationship does break down, but the water is murky.

What it all boils down to is ownership.

The Issue of Ownership 

Who owns a property is the big question when it comes to cohabiting a property.

It is possible for two people to own 100% of a property, to own 50% each, for one person to own the whole home and for someone to own 0%, and the list goes on.

You can see why many cohabiting couples get confused.

If you are cohabiting and you want a clear situation, it is a great idea to sign up for a tenancy agreement, of which there are two main ones to pick from.

Types of Tenancy

Tenancy in Common

Popular with friends or relatives who are deciding to live together, a tenancy in common agreement splits the property into percentages. These are then owned by each person in the agreement.

For example, if two people were to choose this agreement, they would each own 50% of the home.

That is unless one party has contributed a lot more into buying the house, or will contribute more to the house when owned, in which case they may own 75% compared to the other party’s 25% for example.

They would still both have to agree to sell the property, although by rights they are allowed to get a separate mortgage (they are very unlikely to find a mortgage provider who will provide one though).

As each person owns their own segment of the property, they can leave their property to who they like in a will.

This is good news for people who would like to leave their part of a property to their children or a sibling for example.

Tenancy in common is often used with friends or family as they are more likely to want to go their separate ways at some point in the future.

It is a fair way of doing things as the percentage owned should generally reflect the money put into the property, therefore nobody leaves out of pocket and it is always clear exactly who is entitled to what.

Joint Tenancy 

This is similar to a tenancy in common agreement, except both parties own 100% of the house. This means if a member of the agreement dies, the house immediately is given to the other party, no matter the wishes left in the will.

This is a popular agreement for couples as they don’t plan to ever need to go through the separation process.

One joint mortgage is needed to sign up for this agreement.

If a couple splits up, and one member wants to remain in the house, they would have to buy the other person’s half.

This is when issues with joint tenancy agreements occur, as some people may argue they have put more into the house, therefore deserve more.

For example, if someone wins £100,000 on the lottery, and uses this as a deposit payment to buy a house for £300,000 with their partner on a joint tenancy agreement, they have immediately split the property down the middle.

If they sold the house a month later for the same price, both parties are entitled to £150,000, despite the huge sum put into a deposit by one of the couple.

Cohabitation Agreement 

If two people live together, they may want to sign a cohabitation agreement. This is a legal document that sets out who gets what in case they split up or a partner passes away or becomes seriously ill.

This can be a good idea as it leaves no cause for debate if an event like this did happen.

All assets are listed and are split into the percentages of who gets what.

It is also a great way of dividing up bills and making sure everyone is paying for their part of the home, which should hopefully lead to both parties being happy with the settlement they receive.

Deed of Trust 

A deed of trust is similar to a cohabitation agreement but is often used in line with a tenancy in common agreement.

This is something that legally splits the property up so everyone knows what share they own, and there can be no arguments when it comes to selling or if one party wants to leave.

This is a great choice to make sure that everyone is paying for the amount of the property they owe and to minimise any conflict when the time does come to move on.

The difference between this and a cohabitation agreement?

Well, a cohabitation agreement is used to split a house up in the instance a relationship breaks down. This is an in-depth report that will look into all assets and split the money correctly. A deed of trust on the other hand is more focussed on who gets what in the case of a sale and is better suited in the less tense situation of a couple selling up and moving somewhere else.

Trust in One Name Only 

In some instances, the property could be owned by one person only.

This is often used if someone owns their own house, and then allows a friend of a partner to move in with them.

If the property belongs 100% to one person only, then it can be tricky for the other person as they have no rights.

They can put money into the house and live there for a long time but would still have to fight, backed by solicitors, if they wanted to get some money back if it came to leaving the house.

How to Make Cohabitation Work 

Cohabitation isn’t always easy, but there are ways to make it work. These include:

Sign an Agreement 

If you are worried about your rights to a house, then seeking expert advice on how to find an agreement that will work for you is a great way to reassure you and your cohabitor that you are both entitled to a fair share of a property when it is time to sell.

Whether friends, family, or a partner, there are a variety of agreements that will make sure everyone is paying their due and are entitled to what they are owed.

Know your Tenancy Roles 

It’s never wise to jump straight into a mortgage.

Take some time to research your tenancy roles.

If you’re putting a lot more money in but signing up for a joint tenancy agreement, you could find yourself out of pocket when the time comes to sell the house.

Working out which tenancy role works best for you and making sure you have a strong and fair agreement in place from the beginning is vital to making sure everyone is happy.

Be Open and Honest 

Talking about issues with finance and property can be tricky, but it is always a good idea to be honest with the person you live with.

If you feel you are paying more than you owe, or you are worried about your tenancy agreement, speak to your cohabitor.

More often than not, both parties can come to an agreement and find a situation that works for them.

If you are still worried, seek expert help and explain your situation.

Make a Will 

A will is a great way to provide peace of mind when it comes to who inherits a property.

If you have a tenancy in common agreement, you are entitled to leave your share of a property to whomever you would like, so writing up a will makes sure that this is the right person and that the person/people who own the rest of the property don’t immediately inherit your percentage.

If you want to discuss a will, then get in touch with a solicitor and make sure you have all affairs in order if the worst-case scenario does occur.

Final Thoughts

It’s great when you live with someone.

Shared finances and great company make cohabited homes happy homes.

If you would like to make sure there are no arguments when the time comes to move on there are plenty of agreements that you can use, either before or after moving in together, that will make sure every party receives a fair share and that everyone is happy with the outcome of the move.

If you are looking to cohabit, we hope you've found this blog useful. 

Currently looking for a new home with your partner? Take a look at our current listing here.