With more Australians delaying marriage until later in life, and four out of five married couples living together before tying the knot, buying a home with your partner can seem like a great way to get on the property ladder.
Although the average age of first-home buyers has remained constant at 32-years-old for two decades, the median age of marriage in 2015 was 31.8 for men and 29.8 for women, compared with 29.5 for men and 27.6 for women in 2005, according to data from the Australian Bureau of Statistics.
If you are already living with your partner, your finances will likely have already merged to some degree, and buying property together may have crossed your mind. After all, it’s easier to secure and service a loan with two incomes rather than one.
But considering that buying a home is one of the largest purchases you will ever make, there is much more at stake financially than signing a lease on a rental property, especially if the relationship comes to an end.
While you may think that marriage would make it easier to secure a loan, or offer you more security in the event of a break-up, the reality is that the banks and the courts treat de facto couples the same as married couples.
Mortgage broker and owner of Simplify Finance, Fabio De Castro, says an increasing number of his clients, about 40 per cent, aren’t married when they secure a home loan.
“These days, a lot of people are very comfortable in de facto relationships and living together,” he says.
According to De Castro, unmarried couples with healthy finances aren’t less likely to be able to secure finance for a joint purchase than a married couple.
“If you have been living together for three months, banks will class you as de facto,” he says.
For many couples, financial contributions from parents can be a big help when it comes to purchasing a home, with 29 per cent of first-home buyers relying on parents to help fund a purchase, through cash gifts, rent-free accommodation or guarantor loans.
But according to De Castro, when parents’ finances become involved, it can be complicated if the relationship comes to an end.
“We had a de facto couple who were looking to buy a place together. They didn’t have enough for a deposit, so her mother went guarantor,” he says.
“They bought an apartment, but six months later ended up separating. Without her mother supporting them, we needed to find a way to refinance him to be able to buy her out.”
When it comes to guarantor loans, there are ways that parents can minimise their risk, according to Bounce Financial director Cara Brett.
“It’s important for parents to understand whether they are guaranteeing the whole loan or just a small part of it,” she says. “Sometimes they only need to guarantee a portion of the loan.”
Although it can be an awkward and less-than-romantic conversation, it’s smarter to discuss beforehand how the property will be divided if the relationship ends.
It’s worth having a frank and open talk about potential scenarios, such as whether you would need to sell the home to pay off the loan or if one partner could buy the other out. If contributions made to the deposit or repayments are unequal, you should discuss how the sale proceeds in the event of a split.
If a de facto couple can’t agree on how assets should be divided after a break-up, disputes can be handled in the Family Court, but it’s often costly and stressful.