Applying for a mortgage as a couple has both its pros and cons. On one hand, two incomes are better than one for paying off a mortgage, but figuring out how to divide your monthly payment and mortgage insurance, bills, and a host of other expenses in a way that suits both parties can be tricky – but it doesn’t have to be! Here are a few helpful tips to help get you and your partner started on the path to co-mortgaging.
Consider a Joint Account
A home comes with a number of expenses, both expected and not. Opening a joint account and agreeing to put a specific amount of money in that account each month is a way to plan for these expenses and divide the costs. Just set up automatic deposits from your primary account into the joint account.
A great benefit to this is you can arrange for home expenses to be automatically deducted from the joint account each month. It keeps your personal accounts separate, so you can still make “fun” purchases while having a single account dedicated to the necessities.
Choose a Mortgage Manageable With One Income
If you co-sign a mortgage with someone, you are 100% liable for the expense even if the relationship dissolves. The advice of “living below your means” applies here. When trying to determine what’s affordable when applying for a mortgage choose an amount you can manage on a single income, in case the need to do so ever arises. You might have to pay it on a single income for other reasons such as if one of you falls ill or is injured and cannot work
Sit down with your partner and discuss the amount of debt you’re comfortable taking on. Once you’ve determined how much debt you can manage, cut that amount by half and set that as your limit. Just because you can take on a certain amount doesn’t mean you should; if you do, and are hit by unexpected expenses, it can start a downward financial spiral that’s hard to correct.
Put It In Writing
No matter how much you trust and love your partner, you should contact a real estate lawyer and sign the agreement together. This protects you both and gives you something to refer to in the event of a disagreement or argument over one person paying too much. Include specific details in this agreement, such as what bills each person will pay, what percentage of the mortgage each person will pay, who is responsible for what repairs, etc.
The agreement should also include what happens if the relationship dissolves. Does one party take the property and the other is absolved of responsibility, or do they continue to pay it down together? Determining this ahead of time can make a potentially difficult situation easier to navigate.
Be Open About Finances
Another key to managing a mortgage as a couple is to be open about your finances with one another. If you make a purchase, let the other person know. This allows both parties will be prepared if difficulties arise for one or the other. Being open with financial information helps to keep you both in check, and allows one to point out if a potential purchase or expense affects your ability to keep up with the mortgage.
Embrace the Budget
Budgeting isn’t fun. No one likes to think about their expendable income becoming restricted, but living on a budget gives you the freedom to spend money as you please after all other expenses are taken care of. You don’t have to worry about whether you’ll have the money to pay a certain bill on a given month or not. Set up a budget with your partner. Decide what expenses are most important and give them priority, then work your way through so you have money set aside for saving, investing, and any other important expenses. Whatever is left over can be your “fun” budget.
Managing a mortgage as a couple can be intimidating, but with a bit of pre-planning, you can simplify the process and embrace the excitement of a new home together – without the worry of paying for it.