You and your partner want to look at buying a home together. That is great! Here are some things you may want to consider before you do.
Open A Joint Bank Account
The easiest way for the both of you to come up with a budget and keep track of your income, is by joining your bank accounts. Write a schedule of the times all your current automatic deposits are coming out, whether that be for your phone, car payments, etc. Determine what day of the month your mortgage payments will come out and how you want to manage your chequeing and savings accounts.
Of course, you do not have to open a joint account if you do not feel it is right for you. But make sure you go through the pros and cons with your partner first before making a final decision.
Compare Credit Scores & Get Pre-Approved
If both of you have a good credit score, you may be pre-approved for the amount you were hoping for. If one of your scores is poor and the other is good, you may not qualify for a high amount, unless only one of you puts your name on the title to the property, which means you will also be responsible for the loan.
Ways To Hold The Title To Your New Home
Sole Owner: Owned entirely by one person. You are responsible for the mortgage payments, insurance, etc. Your partner is obviously helping pay for things but does not own anything and is technically paying you rent. You will want a written contract outlining who owns what, and how things will run if you ever decide to split up.
Joint Tenants: Both of you will own an equal amount of the property. If one of you were to unexpectedly pass away, the remaining property will be transferred to surviving partner. Neither of you can have a larger share and if you decide to sell the property, you are splitting the price evenly.
Tenants In Common: This title is a bit different than joint tenants. The difference being that you and your partner can own unequal amounts of the property. If your credit score is poor and your partners’ is good, you might own 40% but your partner could own 60% and you cannot change the amount without consent.
If one of you unexpectedly passes away, you still own your percentage and the rest will be paid by whoever your partner listed on the agreement. You could also buy out the other percentage if you so choose.
With your combined income it should be easier to determine your budget. Next, create a list of your upcoming expenses (and your current expenses):
- Down payment
- Closing costs (which will vary in each case but will include lawyer fees, appraisal fees, inspection fees, land transfer taxes, etc.)
- Moving costs
- Mortgage payments (including interest, insurance, and property taxes)
- Car payments (if applicable)
If you are both struggling to come up with money for a down payment, you can borrow from a different lender than who your mortgage loan is through, or, if you are both first-time buyers you are allowed to borrow $25,000 each from your Registered Retired Savings Plan (RRSP) account (as of January 2019). If you do borrow from your RRSP, you will need to pay it back within 15 years.
Combining your money for a larger down payment is probably your best option, as it will lower your monthly mortgage payments and increase your equity. If there is just one name on the title of the property though, only that person will have equity in their name and could affect the person without equity negatively with future home purchases.
Tax Credit Return
If both you and your partner are first-time buyers, you could qualify for the First Time Home Buyer Tax Credit. You can claim up to $5,000 to help cover closing costs, inspections, etc.
You could also qualify for the Land Transfer Tax Refund. You both have to be first-time buyers and could receive up to $4,000.
Even if you are confident with your partner and things are getting serious, you should always have things in writing with signatures to refer back too if things ever did get heated. But otherwise, join your bank accounts, start setting up your budget, and start going to those open houses together. It is an exciting time and could potentially be the start to the rest of your lives.
Disclaimer: Prices subject to change
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