Are you planning to buy a home together? Here are some things to consider
Are you planning to buy a home together with your partner? It will make sense to put a few things in writing. In this article we discuss the finer details of buying a home together, including possible pitfalls.
Should you buy alone or together?
You have been living together with your partner in a rented property for some time, but now you two are thinking of buying your own place. One of the first things to consider is: do you want a mortgage that you can still afford on one salary? Or are you going to go for a maximum mortgage based on two incomes? Or something in between?
If you buy the home on one income, the need to insure for the contingency that one of the incomes is lost is less. It can also be a good idea if you expect to be working or earning less in the future.
Buying on two incomes allows for a higher maximum mortgage (see also the financial burden rate). In that case it is advisable to take out an insurance covering the risk of losing the second income, such as life insurance or disability-mortgage protection insurance.
In any case you should discuss with your partner how much you can afford in monthly mortgage payments. This is because the maximum mortgage calculation is based on the standard norms of Nibud (National Institute for Family Finance Information). Of course, you are best placed to decide at what level of mortgage payments you still have enough money for any other financial plans you have.
Buying together? You need to decide whether to get married or opt for a different form of cohabitation.
Buying together: this is what you can provide for and set down in writing
Have you not formalised your form of cohabitation yet? This is not a requirement for your mortgage application, but it is advisable to take steps if you are planning on buying a home together. There are basically three different forms you can choose from:
- Registered partnership
- Cohabitation contract
For more information and advice on what form is most suitable for you, please contact your civil-law notary.
Marriage and registered partnership
In the case of marriage and registered partnership, a limited community of property is the standard since 1 January 2018. If this is not what you want, you can ask your civil-law notary to draw up a prenuptial agreement or a partnership agreement.
Usually, an owner-occupied home and the mortgage debt become part of the community property. In the event of your or your partner’s death, the other partner can keep on living in the property. However, the surviving partner also becomes liable for the full mortgage debt. That is why it makes sense to take out a life insurance.
In a cohabitation contract you lay down that you are joint home owners and jointly responsible for the mortgage debt. If you like, you can divide the mortgage payments other than fifty-fifty. You also usually record what household effects are joint property and how much you each contribute to the household expenses.
It will be useful to make such provisions that you or your partner cannot be evicted if the other partner should die, because in a cohabitation contract you do not automatically becomes each other’s heir. You can cover this by including a survivor’s clause in your cohabitation contract, and you might consider drawing up a will. And to ensure that the surviving partner is still able to pay the mortgage, you would do well to also in this case take out life insurance. Do you want your partner to be entitled to any accrued survivor’s pension when you die? Please contact your pension fund.
Focus on your homeowner history
Have you or your partner owned a home before? And are you buying a home together for the first time? Then keep in mind that you share your homeowner history with your partner for tax purposes. It is therefore important to fill in your tax return correctly (or have someone do this for you), or you might miss out on a mortgage interest deduction. You can find more information on this subject in this article, or you can ask your mortgage adviser.
Get expert advice!
Buying a home together allows for a higher maximum mortgage, but it requires that you decide on your form of cohabitation. To decide the best form in your situation, it will be useful to seek advice from a civil-law notary.
Of course, Viisi is happy to advise you on your mortgage. Don’t you have a civil-law notary? We can help you with this too. Below, you can make a telephone appointment with one of our advisers without any obligation!